O objetivo da dissertação é analisar a estrutura de proteção das companhias brasileiras de capital aberto em relação ao insider trading que, consiste na utilização de informações relevantes sobre as empresas, por pessoas que, por força de sua atividade profissional, conhecem aspectos fundamentais dos negócios das companhias e usam essa vantagem para negociar as ações dessas empresas antes que tais informações sejam de conhecimento do mercado em geral. A proposta do estudo está em responder a seguinte questão: tendo em vista os casos de insider trading julgados pela Comissão de Valores Mobiliários (CVM) entre 2002 e 2014, de que forma as práticas de governança corporativa das companhias abertas brasileiras influenciaram na decisão da autarquia de punir/absolver os seus administradores? Desta forma, analisam-se os processos administrativos sancionadores instalados pela CVM, nos quais administradores de companhias de capital aberto brasileiras foram acusados de negociar ações com informação privilegiada e, assim, evidencia-se o papel da estrutura de governança corporativa das sociedades no processo de punição ou absolvição dos agentes. As consequências econômicas para as companhias abertas que possuem agentes envolvidos na prática de insider trading justificam o presente trabalho. Quando há a ocorrência deste tipo de evento relacionado à determinada companhia, fica clara a fragilidade dos mecanismos de governança corporativa desta empresa e, consequentemente, o mercado precifica tais condições através da desvalorização das ações. Além disso, os escândalos gerados pela publicidade dos casos de insider trading podem, no limite, impactar os resultados operacionais de uma empresa, tendo em vista o tamanho dos impactos tangíveis e intangíveis, ligados ao nome, marca e reputação das companhias. No que tange ao posicionamento de uma empresa brasileira de capital aberto em relação ao insider trading, constatou-se, através da análise dos julgados da CVM entre 2002 e 2014, que ele se materializa nas efetivas práticas das sociedades e não, simplesmente, no nível de governança corporativa no qual a companhia transaciona seus valores mobiliários. A adoção das práticas sugeridas que, por sua vez, permeiam as faces preventivas, de monitoramento e de reação ao ilícito, mitiga consideravelmente o risco de dano à reputação das companhias que as adotarem e, concomitantemente, evita a responsabilização individual de conselheiros e diretores. A experiência brasileira, do período de 2002 a 2014, indica que a compreensão da atuação da CVM no combate ao insider trading aumenta na medida em que o número de processos sancionadores expande e, consequentemente, se amplia a base de dados de precedentes sobre o assunto. Por fim, o constante monitoramento das discussões sobre o assunto, a ampliação da análise estatística de casos julgados de insider trading no país e do comportamento do órgão regulador brasileiro, munem os responsáveis pela gestão das companhias de capital aberto de direcionamentos estratégicos para a elaboração de planos de ação eficientes, a fim de mitigar o risco a que administradores estão expostos em função de seus cargos. / The objective of this thesis is to analyze the protection structure of Brazilian publicly-held companies against insider trading, which consists of using relevant information about companies by people who, due to their professional activity, are aware of fundamental aspects of the companies' businesses and use this advantage to trade shares of such companies before such information is disclosed to the market. The study proposal is to answer the following question: considering the cases of insider trading judged by the Brazilian Securities and Exchange Commission (CVM) between 2002 and 2014, how the corporate governance practices of Brazilian publicly-held companies influenced the decision of the CVM in punishing/acquitting their executives? Thus, the administrative sanctioning processes installed by the CVM were analyzed, in which managers of Brazilian publicly-held companies were accused of dealing with insider information. Therefore, the role of the companies’ corporate governance structure in the decision-making process of punishment or acquittal of the executives is evidenced. The economic consequences for companies that have executives involved in insider trading justify this study. When this type of event is related to a particular company, the fragility of the corporate governance mechanisms of this company is highlighted and, consequently, the market evaluates such conditions through the shares pricing. At worst, the backlash generated by insider trading may impact the operating results of a company, given the considerable tangible and intangible impacts linked to the companies' name, brand and reputation. Regarding the position of a Brazilian publicly-held company in relation to insider trading, it was verified through the analysis of CVM judgments (2002-2014) that it materializes in the effective practices and not simply in the level (BM&FBOVESPA criteria) of corporate governance in which the company transacts its securities. The adoption of prevention, monitoring and reaction suggested practices, mitigates considerably the risk of damaging the reputation of companies and, at the same time, avoids individual liability for directors and officers. The Brazilian experience, from 2002 to 2014, indicates that the understanding of the CVM's action in combating insider trading increases as the number of sanctioning processes expands and, consequently, the database of precedents on the subject is expanded. Finally, the constant monitoring of the discussions on the subject, the expansion of the statistical analysis of insider trading cases in Brazil and of Brazilian regulator behavior provide the managers strategic directions to the elaboration of efficient action plans in order to mitigate the risk to which managers are exposed based on their positions.

In this dissertation, I consider a range of topics related to the role played by information in modern asset pricing theory. The primary research focus is twofold. First, I synthesize existing research in insider trading and seek to stimulate an expansion of the literature at the intersection of work in the insider trading and financial economics areas. Second, I present the case for using Peter Bossaerts's (2004) Efficiently Learning Markets (ELM) methodology to empirically test asset pricing models. The first chapter traces the development of domestic and international insider trading regulations and explores the legal issues surrounding the proprietary nature of information in financial markets. I argue that, practically, the reinvigoration of the insider trading debate is unfortunate because, in spite of seemingly unending efforts to settle the debate, we are no closer to answering whether insider trading is even harmful, much less worthy of legal action. In doing so, I challenge the conventional wisdom of framing insider trading research as a quest for resolution to the debate. By adopting an agnostic perspective on the desirability of insider trading regulations, I am able to clearly identify nine issues in this area that are fruitful topics for future research. The second chapter studies prices and returns for movie-specific Arrow-Debreu securities traded on the Iowa Electronic Markets. The payoffs to these securities are based on the movies' initial 4-week U.S. box office receipts. We employ a unique data set for which we have traders' pre-opening forecasts to provide the first direct test of Bossaerts's (2004) ELM hypothesis. We supplement the forecasts with estimated convergence rates to examine whether the prior forecast errors affect market price convergence. Our results support the ELM hypothesis. While significant deviations between initial forecasts and actual box-office outcomes exist, prices nonetheless evolve in accordance with efficient updating. Further, convergence rates appear independent of both the average initial forecast error and the level of disagreement in forecasts. Lastly, the third chapter revisits the theoretical justifications for Bossaerts's (2004) ELM, with the goal of providing clear, intuitive proofs of the key results underlying the methodology. The seemingly biggest hurdle to garnering more widespread adoption of the ELM methodology is the confusion that surrounds the use of weighted modified returns when testing for rational asset pricing restrictions. I attack this hurdle by offering a transparent justification for this approach. I then establish how and why Bossaerts's results extend from the case of digital options to the more practically relevant class of all limited-liability securities, including equities. I conclude by showing that the ELM restrictions naturally lend themselves to estimation and testing of asset pricing models, using weighted modified returns, in a Generalized Method of Moments (GMM) framework.

Previous literature have documented that the independent directors play a crucial goal in corporate governance but the research on the firm value and board independence remains inconclusive. In my dissertation, I examine the impact of independent directors' geographic proximity to corporate headquarters on the effectiveness of corporate boards and the motivations of board directors. Using a large sample of directors trading, I show that independent directors who live close to headquarters ("local director") earn higher abnormal returns on their trades than other directors, and that this advantage is stronger in small firms. Further, I find an inverse relationship between the number of local independent directors on the board and firm value. Companies with fewer local independent directors also have higher ROA ratios, lower abnormal CEO compensations, and higher CEO incentive compensations. Collectively, the findings suggest that local independent directors are more informed but less effective monitors. I also provided evidence that firms with a higher proportion of directors' incentive compensation are more likely to manage earnings. Directors are more likely to exercise options in the year following the firms' earnings management being in the top tercile of the sample. The results are robust after controlling for self-selection bias. Taken together, the evidence suggests that director incentive pay is more likely to align directors' interest with the CEO's, rather than to induce the directors to act in the best interest of the shareholders.

This dissertation examines the impact of regulation and public policies on firm performance. Chapter 1, entitled “Political Contributions, Insider Trading, and CEO Compensation”, determines why CEOs from politically-connected firms receive higher pay compared to their non-politically connected peers. We investigate whether insider trading can explain high CEO pay. Using hand-collected firm-level lobbying data, we examine whether politically-connected CEOs engage in insider trading after sponsored bills are introduced and passed in the U.S. legislative bodies. Our results show that politically-connected CEOs commit insider trading, which yields higher compensation packages. In addition, we also find that lobbying benefits firm performance. Politically-connected firms receive more government contracts, which increases firm value. Overall, political contributions benefit both CEOs and shareholders. Chapter 2, entitled “The Impact of Incarceration on Firm Performance” conducts analyses on the impact of incarceration on firms based in the United States. Through time series Granger Causality Vector Autoregression (VAR) tests by state, we find that incarceration can influence labor markets measured by the state’s unemployment rate. We find that firms based in states with high incarceration underperform compared to firms based in states with low incarceration. This also holds true when examining prison reform data from the Pew Charitable Trust. Through differences in differences tests, we find that firms based in states with prison reform outperform firms based in states without prison reform. When controlling for firm and state macroeconomic factors, we find that increases in incarceration rates have a negative effect on firm performance.

<p>This thesis consists of an introductory chapter and four self-contained essays on the value relevance of financial statement information.</p><p>Essay 1: The purpose of this essay is to examine relevance of environmental information from an investor’s perspective. The study proposes that the market value of companies will reflect both financial and environmental performance. The theoretical foundation of the study is the accounting based valuation theory outlined by Ohlson (1995). This study provides new insights into how environmental performance is reflected in the market value of Swedish companies listed on the Swedish Stock market.</p><p>Essay 2: In financial accounting research, much effort has been devoted to study the relation between accounting earnings and stock prices. The primary purpose of the second essay is to investigate the effect of alternative return-earnings model specifications to the estimated returns-earnings relation, that is, the earnings response coefficients. The returns-earnings models investigated include the traditional earnings levels and changes, and models including analysts’ earnings forecasts based on Ohlson’s (1995) extended residual income model.</p><p>Essay 3: Fundamental analysis research that focuses on the use of accounting information to estimate equity value, has surfaced as a central theme in market based accounting research of the 1990s (Lee, 1999). The purpose of third essay is to compare two different approaches to valuation based on the theory presented in Ohlson (1995) in terms of explanatory and predictive power of the value estimates. Both approaches are implemented with and without the use of analysts forecasts. </p><p>Essay 4: In this essay data from the Swedish stock market is used to investigate the profitability of two different types of investment strategies based on fundamental-to-value ratios and past insider trading activity. The purpose of the research is to explore four related research questions: (i) Do accounting based trading strategies generate abnormal returns on the Swedish stock market?; (ii) Do trading strategies based on insider trading behaviour generate abnormal returns on the Swedish stock market?; (iii) Do insiders who buy stocks tend to favour value stocks and do insiders who sell stocks tend to dispose growth stocks?; and (iv) Are insiders able to discriminate between temporary high/low fundamentals and temporary low/high prices when buying/selling value stocks and growth stocks? </p>

Föreliggande uppsats undersöker om det har funnits någon indikation av insiderhandel för tio utvalda företag på Stockholmsbörsen under andra halvan av 2004 när dessa företag presenterar vinstvarningar. Uppsatsen beskriver huvuddragen av den Svenska insider-lagstiftning, och framlägger argument för en effektiv lagstiftning både från ett ekonomiskt och också från ett juridiskt perspektiv. De tio företagen har analyserats under en trettio dagars period. Slutsatsen är att det har förekommit indikationer på insiderhandel i två företag under perioden fram till vinstvarningen. Denna uppsats presenterades och försvarades våren 2005 vid Internationella Handelshögskolan i Jönköping. / This thesis analyzes if there has been any indication of insider trading for ten selected-companies on the Stockholm Stock Exchange during the second half of 2004 when these companies have reported loss announcements. It outlines the Swedish insider leg-islation, and put forward arguments for an effective insider legislation from an eco-nomic and legal perspective. The ten companies have been analyzed during a thirty days period. The conclusion is that there is signs of insider trading in two companies during the period prior to the loss announcement date. This thesis was presented and defended in the spring of 2005 at Jönköping International Business School.

Background: Studying insider trading is difficult due to its sensitive and delicate nature. Therefore it is hard to gauge the extent of such activities. This problem has resulted in a fierce debate whether it should be prohibited or not. Using a method where the effect on monopolistic information usage can be isolated insider trading can be monitored. Such an event is a profit warning. Purpose: This paper examines whether insider trading exist for companies making a profit warning between year 2003 and 2007 on the Stockholm Stock Exchange. Furthermore the aim with the study is to contribute to the debate on the insider trading legislation. Method: The study’s purpose is achieved through an event study studying the cumulative abnormal return as well as average daily returns during the thirty days preceding the warning for a sample of thirty companies. Since profit warnings should be completely random and as such almost impossible for the market to know in advance, a significant abnormal return can only be explained with insider trading. The abnormal returns were calculated using the Capital Asset Pricing Model since it is the most widely used model. Conclusion: For the chosen time frame, when testing on a 95% significance level, the study found a significant abnormal return during the last 10 days of the event window but not for the entire period of thirty days. The daily average return for the thirty companies were significant for six of the thirty days within the event window. Two of them were included in the last ten day period with a confirmed significant abnormal return which might suggest that on average insider trading tend to occur during these days. The other four was discarded due to sample issues. Since the study was limited to a period of four years extending the results to a period other than tested should be made with great care since conditions may differ over time. Concerning the current debate on the insider legislation, the findings can be used by both sides. Either to argue for a strengthening of the law or to question its existence.

Background: Studying insider trading is difficult due to its sensitive and delicate nature. Therefore it is hard to gauge the extent of such activities. This problem has resulted in a fierce debate whether it should be prohibited or not. Using a method where the effect on monopolistic information usage can be isolated insider trading can be monitored. Such an event is a profit warning. Purpose: This paper examines whether insider trading exist for companies making a profit warning between year 2003 and 2007 on the Stockholm Stock Exchange. Furthermore the aim with the study is to contribute to the debate on the insider trading legislation. Method: The study’s purpose is achieved through an event study studying the cumulative abnormal return as well as average daily returns during the thirty days preceding the warning for a sample of thirty companies. Since profit warnings should be completely random and as such almost impossible for the market to know in advance, a significant abnormal return can only be explained with insider trading. The abnormal returns were calculated using the Capital Asset Pricing Model since it is the most widely used model. Conclusion: For the chosen time frame, when testing on a 95% significance level, the study found a significant abnormal return during the last 10 days of the event window but not for the entire period of thirty days. The daily average return for the thirty companies were significant for six of the thirty days within the event window. Two of them were included in the last ten day period with a confirmed significant abnormal return which might suggest that on average insider trading tend to occur during these days. The other four was discarded due to sample issues. Since the study was limited to a period of four years extending the results to a period other than tested should be made with great care since conditions may differ over time. Concerning the current debate on the insider legislation, the findings can be used by both sides. Either to argue for a strengthening of the law or to question its existence.

Bakgrund: Börsen ger en möjlighet för företag att erhålla kapital och för placerare atttillgodogöra sig avkastning. Personer med insyn i det egna företaget, så kalladeinsiders, kan dock i egenskap av sin position inneha kurspåverkande information somövriga aktörer på marknaden inte har möjlighet att ta del av. Tidigare forskning harpåvisat att insiders utnyttjar denna informationsasymmetri för att på så sätt tillgodogörasig överavkastning. Syfte: Syftet med studien är att undersöka om insiders kan tillgodogöra sigöveravkastning genom handel med aktier på Nasdaq OMX. Vidare ämnar studienutröna eventuella skillnader i överavkastning beroende på företagsstorlek,transaktionsstorlek samt tidsperiod. Metod: I denna studie har en kvantitativ forskningsstrategi i form av en eventstudietillämpats. Studien har en deduktiv ansats och undersöker insidertransaktioner från 90företag på stockholmsbörsen under tidsperioden 2006-01-01 till 2011-12-31. Förberäkning av överavkastning har den justerade marknadsmodellen använts. Kursdata förrespektive företag har hämtats från databasen Thomson Reuters EcoWin Pro.Information om insidertransaktioner har hämtats från finansinspektionensinsynsregister. Resultat: Resultatet visar att insiders tillgodogör sig överavkastning genom handel medaktier i det egna företaget, främst i samband med säljtransaktioner. / People with insight into their own company, also known as insiders, can have access toprice-sensitive information which other investors are not able to access. Previousresearch has shown that insiders exploit this asymmetric information to thereby obtainabnormal returns. The purpose of this study is to investigate whether insiders can obtain abnormal returnsby trading shares on Nasdaq OMX. Furthermore, the study aims to investigate if thereare any differences in the abnormal return depending on company size, transaction size,and time period. This study investigates insider transactions of 90 companies on the Stockholm StockExchange during the time period 2006-01-01 to 2011-12-31. The results show that insiders obtain abnormal returns by trading shares in their owncompany. The abnormal returns occur primarily related to sales transactions.

This research has studied the relationship between insider trading activity and its effect on the level of informational efficiency. The authors have used insider data from Finansinspektionen and data regarding stock prices, market capitalization and GDP from Thomson Reuters Datastream. The sample includes 193 companies on the Swedish stock exchange for a period of 10 years. A Variance Ratio test employed on moving sub-sample windows was used to establish the level of time-varying informational efficiency, which subsequently was used in an OLS-regression as a dependent variable. The result of the regression implies a negative effect on firm price information efficiency by insider purchasing, while selling has a positive effect. This can be concluded using a confidence level of 99%. The results are interesting since they imply an asymmetrical effect of insider trading on informational efficiency, while current insider legislation treats buying and selling by insiders equal. Thus, the results are of interest in future adjustments of laws regulating insider trading.