University of Michigan Legal Working Paper Series
University of Michigan John M. Olin Center for Law & Economics Working Paper Series
A Comparative Empirical Investigation of Agency and Market Theories of Insider Trading
Abstract
The paper summarizes various agency cost and market theories of insider trading propounded over the course of the perennial law and economics debate over insider trading. The paper then suggests three testable hypotheses regarding the relationship between insider trading laws and several measures of financial performance. Using international data and alternative regression specifications, the paper finds that more stringent insider trading laws and enforcement are generally associated with greater ownership dispersion, greater stock price accuracy and greater stock market liquidity. This set of findings provides empirical support to theoretical arguments in favor of more stringent insider trading legislation and enforcement.
Subject Area
Banking and Finance, Law and Economics
Recommended Citation
Laura N. Beny,
"A Comparative Empirical Investigation of Agency and Market Theories of Insider Trading"
(February 2004).
University of Michigan Legal Working Paper Series.
University of Michigan John M. Olin Center for Law & Economics Working Paper Series.
Working Paper 4.
http://law.bepress.com/umichlwps/olin/art4
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