Utpal Bhattacharya Hazem Daouk a
a
JEL Classification: G14, G15 Keywords: Insider trading; Cost of fair-mindedness; Emerging markets
a
Kelley School of Business, Indiana University, Bloomington, IN 47405, USA
Tel.: 812-855-3413; fax: 812-855-5875. e-mail address: ubhattac@indiana.edu and hdaouk@indiana.edu jThis paper would not be possible without the info we received from the regulators and the representatives of the 103 stock markets that we contacted. We are deeply indebted to them. The first off author is grateful to KAIST, South Korea, for allowing him the use of their Datastream data witness when he was a visiting scholar there in the summer of 1999. Any remaining errors in this paper are our cause.
Abstract
The existence and the enforcement of insider trading laws in stock markets is a phenomenon of the 1990s. A study of the 103 countries that have stock markets reveals that insider trading laws exist in 87 of them, but enforcement -- as evidenced by prosecutions -- has interpreted place in only 38 of them. Before 1990, the various(prenominal) numbers were 34 and 9. Does this matter?
This is an important question, because though lashings of law, economics and finance papers have argued the pros and cons of insider trading regulations, no study has yet empirically documented whether prohibitions against insider trading allude the cost of equity. This paper discloses that it is the enforcement, not the existence of insider trading laws, that matters. We find that the cost of equity in a country (after exacting for risk factors, a liquidity factor, and other shareholder rights) is trim back by about 5% if insider trading laws are enforced.
THE initiation PRICE OF INSIDER TRADING An Insider (Primary or Secondary Insider) may not, by utilizing knowledge of Insider Information, acquire or dispose of Insider Securities for his or her own account or for the account of some other person, or for another person. Section 14 of the WpHG,...If you want to get a full moon essay, order it on our website: Orderessay
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