The efficacy of market abuse regulation in the UK
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 11 July 2016
Abstract
Purpose
The purpose of this paper is to ascertain the efficacy of Financial Services and Markets Act (FMSA) (2000) in deterring illegal insider trading in target companies around the time of a merger and aquisition announcement.
Design/methodology/approach
The author uses an event study to measure the cumulative average abnormal returns (CAARs) around both the announcement and rumour date for a sample of UK takeovers between 2001 and 2010.
Findings
Statistically significant CAARs prior to the event date are observed across the sample.
Research limitations/implications
It is not possible to link unknown instances of illegal insider trading with pre takeover residuals, therefore explaining the residuals remains a deductive process.
Practical implications
Pre-event abnormal returns may indicate that trading on material nonpublic information is still a contributory factor in the run-up proportion of takeover premiums.
Social implications
This draws a question over the efficacy of the regulatory system.
Originality/value
This study provides evidence which points to insider trading activity ahead of Mergers in a post FMSA 200 UK context.
Keywords
Citation
Lambe, B.J. (2016), "The efficacy of market abuse regulation in the UK", Journal of Financial Regulation and Compliance, Vol. 24 No. 3, pp. 248-267. https://doi.org/10.1108/JFRC-06-2015-0029
Publisher
:Emerald Group Publishing Limited
Copyright © 2016, Emerald Group Publishing Limited