A Comparative Empirical Investigation of Agency and Market Theories of Insider Trading
AbstractThe paper summarizes various agency cost and market theories of insider trading propounded over the course of the perennial law and economics debate over insider trading. The paper then suggests three testable hypotheses regarding the relationship between insider trading laws and several measures of financial performance. Using international data and alternative regression specifications, the paper finds that more stringent insider trading laws and enforcement are generally associated with greater ownership dispersion, greater stock price accuracy and greater stock market liquidity. This set of findings provides empirical support to theoretical arguments in favor of more stringent insider trading legislation and enforcement.
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Bibliographic InfoPaper provided by University of Michigan John M. Olin Center for Law & Economics in its series University of Michigan John M. Olin Center for Law & Economics Working Paper Series with number umichlwps-1003.
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-07-26 (All new papers)
- NEP-FIN-2004-07-26 (Finance)
- NEP-FMK-2004-07-26 (Financial Markets)
- NEP-LAW-2004-07-26 (Law & Economics)
- NEP-REG-2004-07-26 (Regulation)
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