Insider Trading Regulation, Blockholder Exit, and Governance Roles

Insider Trading Regulation, Blockholder Exit, andGovernance RolesMengyu YangHongyi XuJanuary 31, 2026Latest version available at:this link.AbstractThis paper investigates how tightening insider trading regulations impacts the gov-ernance roles of blockholders. Using the 2016 implementation of the Market AbuseRegulation (MAR) as a quasi-natural experiment, we analyze how heightened dis-closure requirements alter the composition and behavior of key shareholders inSweden. We find that short-term (liquidity-focused) investors reduce their boardrepresentation because of stricter insider trading rules, while keeping their presenceon nomination committees unchanged. MAR also increased short-term blockhold-ers’ probability of board exit by 16-20 percentage points. By quantifying the shiftin monitoring intensity versus trading flexibility, we shed new light on the trade-offbetween governance benefits and liquidity constraints.