IDEAS home Printed from https://ideas.repec.org/p/osf/lawarc/n4sre_v1.html
   My bibliography  Save this paper

Substitutes for Insider Trading

Author

Listed:
  • Ayres, Ian
  • Bankman, Joseph

Abstract

When insider trading prohibitions limit the ability of insiders (or of a corporation itself) to use material nonpublic information to trade a particular firm's stock, there may be incentive to use the information to trade instead in the stock of that firm's rivals, suppliers, customers, or the manufacturers of complementary products. We refer to this form of trading as trading in stock substitutes. Stock substitute trading by a firm is legal. In many circumstances, substitute trading by employees is also legal. Trading in stock substitutes may be quite profitable, and there is anecdotal evidence that employees often engage in such trading. Our analysis suggests that substitute trading is less socially desirable than traditional insider trading. We recommend a set of disclosure rules designed to clarify existing law and provide information on the extent of stock substitute trading. We also discuss possible changes in the law that might limit inefficient trading in stock substitutes.

Suggested Citation

  • Ayres, Ian & Bankman, Joseph, 2001. "Substitutes for Insider Trading," LawArchive n4sre_v1, Center for Open Science.
    • Handle: RePEc:osf:lawarc:n4sre_v1
    DOI: 10.31219/osf.io/n4sre_v1
    as

    Download full text from publisher

    File URL: https://osf.io/download/688a400c1b5336d531e7cc6c/
    Download Restriction: no
    File URL: https://libkey.io/10.31219/osf.io/n4sre_v1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:osf:lawarc:n4sre_v1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: OSF (email available below). General contact details of provider: https://lawarchive.info/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.