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The World Price of Insider Trading

  • Utpal Bhattacharya

    (Kelley School of Business, Indiana University)

  • Hazem Daouk

    (Kelley School of Business, Indiana University)

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 taken place in only 38 of them. Before 1990, the respective numbers were 34 and 9. We find that the cost of equity in a country, after controlling for a number of other variables, does not change after the introduction of insider trading laws, but decreases significantly after the first prosecution. Copyright The American Finance Association 2002.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 57 (2002)
Issue (Month): 1 (02)
Pages: 75-108

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Handle: RePEc:bla:jfinan:v:57:y:2002:i:1:p:75-108
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