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Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence

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  • Laura Nyantung Beny

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    Abstract

    Despite the longstanding insider trading debate, there is little empirical research on insider trading laws, especially in a comparative context. The article attempts to fill that gap. I find that countries with more prohibitive insider trading laws have more diffuse equity ownership, more accurate stock prices, and more liquid stock markets. These findings are generally robust to controlling for measures of disclosure and enforceability and suggest that formal insider trading laws (especially their deterrent components) matter to stock market development. The article suggests further avenues of empirical research on the specific mechanisms through which insider trading laws might matter and the political economy of their adoption.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp741.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp741.

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    Length: pages
    Date of creation: 01 Jan 2005
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    Handle: RePEc:wdi:papers:2005-741

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    Keywords: Insider trading law; Market efficiency; Ownership structure; Law and finance; Comparative capital markets;

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    Cited by:
    1. Cumming, Douglas & Johan, Sofia & Li, Dan, 2011. "Exchange trading rules and stock market liquidity," Journal of Financial Economics, Elsevier, Elsevier, vol. 99(3), pages 651-671, March.
    2. Brenner, Steffen, 2011. "On the irrelevance of insider trading for managerial compensation," European Economic Review, Elsevier, Elsevier, vol. 55(2), pages 293-303, February.
    3. Frédéric Demerens & Dorra Najar & Jean-Louis Paré & Jean Redis, 2013. "Typology of stock market offenses in France: An analysis of sanctions by the AMF since 2006," Post-Print, HAL hal-00992928, HAL.
    4. Durnev, Art A. & Nain, Amrita S., 2007. "Does insider trading regulation deter private information trading? International evidence," Pacific-Basin Finance Journal, Elsevier, Elsevier, vol. 15(5), pages 409-433, November.
    5. Yogesh Chauhan & Chakrapani Chaturvedula & Viswanathan Iyer, 2014. "Insider Trading, Market Efficiency, and Regulation - A Literature Review," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 6(1), pages 007-014, June.
    6. Nenova, Tatiana, 2006. "Takeover laws and financial development," Policy Research Working Paper Series 4029, The World Bank.
    7. Jackson, Howell E. & Roe, Mark J., 2009. "Public and private enforcement of securities laws: Resource-based evidence," Journal of Financial Economics, Elsevier, Elsevier, vol. 93(2), pages 207-238, August.
    8. DeFond, Mark & Hung, Mingyi & Trezevant, Robert, 2007. "Investor protection and the information content of annual earnings announcements: International evidence," Journal of Accounting and Economics, Elsevier, Elsevier, vol. 43(1), pages 37-67, March.

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