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Do Insiders Play by the Rules?

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  • William J. Mcnally
  • Brian F. Smith

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.

Suggested Citation

  • William J. Mcnally & Brian F. Smith, 2003. "Do Insiders Play by the Rules?," Canadian Public Policy, University of Toronto Press, vol. 29(2), pages 125-143, June.
    • Handle: RePEc:cpp:issued:v:29:y:2003:i:2:p:125-143
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    References listed on IDEAS

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    1. Comment, Robert & Jarrell, Gregg A, 1991. "The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases," Journal of Finance, American Finance Association, vol. 46(4), pages 1243-1271, September.
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    4. David L. Ikenberry & Theo Vermaelen, 1996. "The Option to Repurchase Stock," Financial Management, Financial Management Association, vol. 25(4), Winter.
    5. Lakonishok, Josef & Lee, Inmoo, 2001. "Are Insider Trades Informative?," Review of Financial Studies, Society for Financial Studies, vol. 14(1), pages 79-111.
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    Cited by:

    1. 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.
    2. Michael R. Veall, 2012. "Top income shares in Canada: recent trends and policy implications," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1247-1272, November.
    3. Ginglinger, Edith & Hamon, Jacques, 2009. "Share repurchase regulations: Do firms play by the rules?," International Review of Law and Economics, Elsevier, vol. 29(2), pages 81-96, June.
    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.
    5. Kent Baker & Shantanu Dutta & Samir Saadi, 2011. "Corporate Finance Practices in Canada: Where Do We Stand?," Multinational Finance Journal, Multinational Finance Journal, vol. 15(3-4), pages 157-192, September.
    6. Andreas Charitou & Christodoulos Louca & Stelios Panayides, 2007. "Cross‐Listing, Bonding Hypothesis and Corporate Governance," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(7‐8), pages 1281-1306, September.
    7. Michael R. King & Dan Segal, 2004. "International Cross-Listing and the Bonding Hypothesis," Staff Working Papers 04-17, Bank of Canada.

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