Do Market Characteristics Impact Abnormal Returns in Insider Trading? An event study of abnormal returns following announcements of CEO transactions on OMX Stockholm Large Cap and Nasdaq First North Growth Market

Sammanfattning

In this study we compare short-term abnormal returns associated with announcements of CEO transactions on OMX Stockholm Large Cap and Nasdaq First North Growth Market. Our final dataset contains 537 CEO transactions on OMX Stockholm Large Cap and 710 CEO transactions on Nasdaq First North Growth Market between 2019 and 2023. We conduct an event study and apply the market model to examine the cumulative average abnormal returns related to insider trading. Our results establish that CEO trading generates abnormal returns on Nasdaq First North Growth Market to a larger extent than on OMX Stockholm Large Cap. We find that acquisitions and disposals result in different market reactions on Nasdaq First North Growth Market, revealing that the signalling value is dependent on the transaction type. In addition, we find that there is a significant difference between how the markets react to CEO transactions for all but one event window. Results indicate that differences in abnormal returns can be attributed to market characteristics. We suggest that the characteristics of Nasdaq First North Growth Market translates into stronger market reactions. Lastly, we find that the market model is sufficient in explaining variation of abnormal returns when comparing it to the Fama- French Three-Factor model.