The impact of the European Insider Trading and Market Manipulation Regulation on the volatility and abnormal returns of the stock market in Poland

Abstract

This article raises the question of whether the European Insider Trading and Market Manipulation Regulation (Market Abuse Regulation—MAR) affected the behaviour of investors around the date of the final financial report announcement. The MAR is a relatively recent regulation in the European Union and provides stricter rules for information disclosure than the previous Market Abuse Directive. One can expect that this regulation should improve the information flow from companies to investors, lowering the volatility of stock returns and abnormal rate of return around the date of the final report. To verify this hypothesis, the panel regressions and ANOVA analysis were applied to the stock prices of 60 medium and large-size companies listed on the Warsaw Stock Exchange in the years 2013–2018. The analysis demonstrates that implementing the regulation has increased the average volatility of stock prices, whereas prices in the period before and after the publication period of annual financial reports remained unaffected. It indicates that the information provided was of lower quality, despite the increase in the information available to the public. Therefore, the anti-abusive regulation requires a modification of rules applied to small stock markets as they do not meet their objectives.