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Do Insiders Play by the Rules?

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  • William J. Mcnally
  • Brian F. Smith
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    Abstract

    The article studies compliance with insider trading regulations of the Ontario Securities Act (OSA) and the Toronto Stock Exchange. In contrast to the scarcity of prosecutions, we find large-scale evidence of insider trading and reporting violations. For example, from 1987 to 2000, approximately 50 percent of firms engaging in stock buybacks do not disclose their trades to the Ontario Securities Commission as required under the OSA. Furthermore, the volume of insider trading is much higher than expected before material news announcements. We offer a number of policy prescriptions to improve compliance.

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    File URL: http://links.jstor.org/sici?sici=0317-0861%28200306%2929%3A2%3C125%3ADIPBTR%3E2.0.CO%3B2-B
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    Bibliographic Info

    Article provided by University of Toronto Press in its journal Canadian Public Policy.

    Volume (Year): 29 (2003)
    Issue (Month): 2 (June)
    Pages: 125-143

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    Handle: RePEc:cpp:issued:v:29:y:2003:i:2:p:125-143

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    1. David L. Ikenberry & Theo Vermaelen, 1996. "The Option to Repurchase Stock," Financial Management, Financial Management Association, vol. 25(4), Winter.
    2. Brockman, Paul & Chung, Dennis Y., 2001. "Managerial timing and corporate liquidity: *1: evidence from actual share repurchases," Journal of Financial Economics, Elsevier, vol. 61(3), pages 417-448, September.
    3. Barclay, Michael J. & Smith, Clifford Jr., 1988. "Corporate payout policy : Cash Dividends versus Open-Market Repurchases," Journal of Financial Economics, Elsevier, vol. 22(1), pages 61-82, October.
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    Cited by:
    1. Michael R. King & Dan Segal, 2004. "International Cross-Listing and the Bonding Hypothesis," Working Papers 04-17, Bank of Canada.
    2. Edith Ginglinger & Jacques Hamon, 2009. "Share repurchase regulations: do firms play by the rules?," Post-Print halshs-00143974, HAL.
    3. Michael R. King, 2009. "Prebid Run-Ups Ahead of Canadian Takeovers: How Big Is the Problem?," Financial Management, Financial Management Association International, vol. 38(4), pages 699-726, December.
    4. Attig, Najah & Fong, Wai-Ming & Gadhoum, Yoser & Lang, Larry H.P., 2006. "Effects of large shareholding on information asymmetry and stock liquidity," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2875-2892, October.

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