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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.

Suggested Citation

  • Laura Nyantung Beny, 2005. "Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence," William Davidson Institute Working Papers Series wp741, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2005-741
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/40127/3/wp741.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

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

    JEL classification:

    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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