Premium
The European Market Abuse Directive: Has it Worked?
Author(s) -
Shahzad Khurram,
Mertens Gerard
Publication year - 2017
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/jifm.12052
Subject(s) - earnings , directive , stock exchange , business , stock (firearms) , volatility (finance) , economics , financial economics , accounting , finance , computer science , programming language , mechanical engineering , engineering
In this paper, we examine whether the Market Abuse Directive ( MAD ) has been effective in achieving its objectives of deterring the market manipulation activities, increasing the timeliness of information and decreasing the disclosure of inside information to select groups. Our sample consists of firms listed on Frankfurt Stock Exchange. We use stock prices and analysts' forecast‐based proxies to examine the impact and effectiveness of MAD . The analysis based on these two set of proxies provides evidence that the adoption of MAD has been effective. In particular, we find that after the implementation of MAD , on average, (1) the volatility of stock prices around earnings announcement declines, (2) stock prices remain closer to their post earnings announcement level during the period before earnings announcement, (3) the accuracy of analyst forecasts improves, (4) the dispersion of analyst forecasts decreases, and (5) the number of analysts following a company declines.