THE IMPACT OF REGULATORY CHANGE ON INSIDER TRADING PROFITABILITY: SOME EARLY EVIDENCE FROM NEW ZEALAND

This paper adds to the scant literature on the tightening of regulations and its impact on the profitability of insider trades by examining the effects of the recent enactment of the Securities Market Amendment Act 2002 in New Zealand. We investigate the abnormal returns around the date of insider transactions both before and after the introduction of this Act. We find that the number of insider transactions decreased just prior to the introduction of the Act; further we observe a marked reduction in the profitability of directors. However, the difference between the pre and post-change returns lacks statistical significance.