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The Optimal Enforcement of Insider Trading Regulations

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  • Peter M. DeMarzo
  • Michael J. Fishman
  • Kathleen M. Hagerty

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  • Peter M. DeMarzo & Michael J. Fishman & Kathleen M. Hagerty, 1998. "The Optimal Enforcement of Insider Trading Regulations," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 602-632, June.
    • Handle: RePEc:ucp:jpolec:v:106:y:1998:i:3:p:602-632
    DOI: 10.1086/250023
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    References listed on IDEAS

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    1. Dilip Mookherjee & Ivan Png, 1989. "Optimal Auditing, Insurance, and Redistribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 399-415.
    2. Admati, Anat R & Pfleiderer, Paul, 1989. "Divide and Conquer: A Theory of Intraday and Day-of-the-Week Mean Effects," The Review of Financial Studies, Society for Financial Studies, vol. 2(2), pages 189-223.
    3. Matthew Spiegel and Avanidhar Subrahmanyam., 1995. "The Efficacy of Insider Trading Regulation," Research Program in Finance Working Papers RPF-257, University of California at Berkeley.
    4. Fischer, Paul E, 1992. "Optimal Contracting and Insider Trading Restrictions," Journal of Finance, American Finance Association, vol. 47(2), pages 673-694, June.
    5. Admati, Anat R & Pfleiderer, Paul & Zechner, Josef, 1994. "Large Shareholder Activism, Risk Sharing, and Financial Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1097-1130, December.
    6. Salant, Stephen W, 1987. "Treble Damage Awards in Private Lawsuits for Price Fixing," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1326-1336, December.
    7. Leland, Hayne E, 1992. "Insider Trading: Should It Be Prohibited?," Journal of Political Economy, University of Chicago Press, vol. 100(4), pages 859-887, August.
    8. Besanko, David & Spulber, Daniel F, 1989. "Antitrust Enforcement under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 99(396), pages 408-425, June.
    9. Townsend, Robert M., 1979. "Optimal contracts and competitive markets with costly state verification," Journal of Economic Theory, Elsevier, vol. 21(2), pages 265-293, October.
    10. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 55-67, National Bureau of Economic Research, Inc.
    11. Khanna, Naveen & Slezak, Steve L & Bradley, Michael, 1994. "Insider Trading, Outside Search, and Resource Allocation: Why Firms and Society May Disagree on Insider Trading Restrictions," The Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 575-608.
    12. Shavell, Steven, 1991. "Specific versus General Enforcement of Law," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1088-1108, October.
    13. Easley, David & O'Hara, Maureen, 1992. "Adverse Selection and Large Trade Volume: The Implications for Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(2), pages 185-208, June.
    14. Shin, Jhinyoung, 1996. "The Optimal Regulation of Insider Trading," Journal of Financial Intermediation, Elsevier, vol. 5(1), pages 49-73, January.
    15. Dye, Ronald A, 1984. "Inside Trading and Incentives," The Journal of Business, University of Chicago Press, vol. 57(3), pages 295-313, July.
    16. Michael J. Fishman & Kathleen M. Hagerty, 1992. "Insider Trading and the Efficiency of Stock Prices," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 106-122, Spring.
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    Cited by:

    1. Acharya, Viral V. & Johnson, Timothy C., 2010. "More insiders, more insider trading: Evidence from private-equity buyouts," Journal of Financial Economics, Elsevier, vol. 98(3), pages 500-523, December.
    2. Selman Erol & Michael Junho Lee, 2018. "Insider networks," Staff Reports 862, Federal Reserve Bank of New York.
    3. Haselmann, Rainer & Leuz, Christian & Schreiber, Sebastian, 2022. "Know your customer: Informed trading by banks," CFS Working Paper Series 705, Center for Financial Studies (CFS).
    4. Madura, Jeff & Marciniak, Marek, 2014. "Bidder country characteristics and informed trading in U.S. targets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 256-284.
    5. 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.
    6. Wielhouwer, Jacco L., 2013. "When is public enforcement of insider trading regulations effective?," International Review of Law and Economics, Elsevier, vol. 34(C), pages 52-60.
    7. Wang, Xue & Yan, Xuemin (Sterling) & Zheng, Lingling, 2020. "Shorting flows, public disclosure, and market efficiency," Journal of Financial Economics, Elsevier, vol. 135(1), pages 191-212.
    8. Ross Levine & Chen Lin & Lai Wei, 2017. "Insider Trading and Innovation," Journal of Law and Economics, University of Chicago Press, vol. 60(4), pages 749-800.
    9. Alex Frino & Stephen Satchell & Brad Wong & Hui Zheng, 2013. "How much does an Illegal Insider Trade?," International Review of Finance, International Review of Finance Ltd., vol. 13(2), pages 241-263, June.
    10. James, Robert & Leung, Henry & Prokhorov, Artem, 2023. "A machine learning attack on illegal trading," Journal of Banking & Finance, Elsevier, vol. 148(C).
    11. Charles M. Jones & Adam V. Reed & William Waller, 2016. "Revealing Shorts An Examination of Large Short Position Disclosures," The Review of Financial Studies, Society for Financial Studies, vol. 29(12), pages 3278-3320.
    12. Mudalige, Priyantha & Duong, Huu Nhan & Kalev, Petko S. & Gupta, Kartick, 2020. "Who trades in competing firms around earnings announcements," Pacific-Basin Finance Journal, Elsevier, vol. 59(C).
    13. Wisniewski, Tomasz P. & Bohl, Martin T., 2005. "The Information Content of Registered Insider Trading Under Lax Law Enforcement," International Review of Law and Economics, Elsevier, vol. 25(2), pages 169-185, June.
    14. Maug, Ernst, 2002. "Insider trading legislation and corporate governance," European Economic Review, Elsevier, vol. 46(9), pages 1569-1597, October.
    15. Detemple, Jerome & Rindisbacher, Marcel & Robertson, Scott, 2022. "Dynamic noisy rational expectations equilibrium with insider information: Welfare and regulation," Journal of Economic Dynamics and Control, Elsevier, vol. 141(C).
    16. Jank, Stephan & Roling, Christoph & Smajlbegovic, Esad, 2021. "Flying under the radar: The effects of short-sale disclosure rules on investor behavior and stock prices," Journal of Financial Economics, Elsevier, vol. 139(1), pages 209-233.
    17. Jiang, Chao & Wintoki, M. Babajide & Xi, Yaoyi, 2021. "Insider trading and the legal expertise of corporate executives," Journal of Banking & Finance, Elsevier, vol. 127(C).
    18. Carré, Sylvain & Collin-Dufresne, Pierre & Gabriel, Franck, 2022. "Insider trading with penalties," Journal of Economic Theory, Elsevier, vol. 203(C).
    19. René M. Stulz, 2009. "Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization," Journal of Accounting Research, Wiley Blackwell, vol. 47(2), pages 349-390, May.
    20. Patrick Augustin & Menachem Brenner & Marti G. Subrahmanyam, 2019. "Informed Options Trading Prior to Takeover Announcements: Insider Trading?," Management Science, INFORMS, vol. 65(12), pages 5697-5720, December.
    21. Vahe Lskavyan, 2015. "Insider regulation and the incentive to invest as an insider," Economics of Governance, Springer, vol. 16(3), pages 207-227, August.
    22. Stulze, Rene M., 2008. "Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization," Working Paper Series 2008-13, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    23. Podolski, Edward J. & Truong, Cameron & Veeraraghavan, Madhu, 2013. "Informed options trading prior to takeovers – Does the regulatory environment matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 27(C), pages 286-305.
    24. Umut c{C}etin, 2023. "Insider trading with penalties, entropy and quadratic BSDEs," Papers 2311.12743, arXiv.org.
    25. Carole Comerton-Forde & Tālis J. Putniņš, 2014. "Stock Price Manipulation: Prevalence and Determinants," Review of Finance, European Finance Association, vol. 18(1), pages 23-66.

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