The insider trading debate
Securities trading has generated some of the most sensational scandals in the popular business press. In one of the most publicized cases of insider trading, in the late 1980s Michael R. Milken and Ivan F. Boesky were sentenced to stiff prison terms and payment of enormous damage assessments and punitive penalties. However, at least among economists and legal scholars, insider trading remains a controversial economic transaction. A substantial body of academic and legal scholarship questions whether insider trading is even harmful, much less worthy of legal actions. ; The authors of this article explore the sources of the insider trading controversy and suggest a road map for blending the divergent scholarly opinions into a policy framework for regulating insider trading. They conclude that the divergence of opinion can be attributed primarily to disagreement over which effects of insider trading will have the most significant impacts on economic well-being. The voluminous literature suggests that designing effective policy on insider trading requires a detailed assessment of the structure of the economy, some sensitivity to cultural attitudes toward the appropriateness of such trading activity, and careful consideration of the enforcement costs associated with regulating trade.
Volume (Year): (1997)
Issue (Month): Q 4 ()
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References listed on IDEAS
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- Noe, Thomas H, 1997.
"Insider Trading and the Problem of Corporate Agency,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 13(2), pages 287-318, October.
- Thomas H. Noe, 1995. "Insider trading and the problem of corporate agency," Working Paper 95-2, Federal Reserve Bank of Atlanta.
- Bebchuk, Lucian Arye & Fershtman, Chaim, 1994. "Insider Trading and the Managerial Choice among Risky Projects," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(01), pages 1-14, March.
- Hayne E. Leland., 1990.
"Insider Trading: Should It Be Prohibited?,"
Research Program in Finance Working Papers
RPF-195, University of California at Berkeley.
- Shin, Jhinyoung, 1996. "The Optimal Regulation of Insider Trading," Journal of Financial Intermediation, Elsevier, vol. 5(1), pages 49-73, January.
- Dye, Ronald A, 1984. "Inside Trading and Incentives," The Journal of Business, University of Chicago Press, vol. 57(3), pages 295-313, July.
- Keown, Arthur J & Pinkerton, John M, 1981. "Merger Announcements and Insider Trading Activity: An Empirical Investigation," Journal of Finance, American Finance Association, vol. 36(4), pages 855-69, September.
- Meulbroek, Lisa K, 1992. " An Empirical Analysis of Illegal Insider Trading," Journal of Finance, American Finance Association, vol. 47(5), pages 1661-99, December.
- Manove, Michael, 1989. "The Harm from Insider Trading and Informed Speculation," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 823-45, November.
- Seyhun, H Nejat, 1992. "The Effectiveness of the Insider-Trading Sanctions," Journal of Law and Economics, University of Chicago Press, vol. 35(1), pages 149-82, April.
- repec:aei:rpbook:53302 is not listed on IDEAS
- 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.
- Ausubel, Lawrence M, 1990. "Insider Trading in a Rational Expectations Economy," American Economic Review, American Economic Association, vol. 80(5), pages 1022-41, December.
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