Abstract

http://ssrn.com/abstract=1929977
 
 

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A Proclivity to Cheat: How Culture influences Illegal Insider Trading


Bart Frijns


Auckland University of Technology - Faculty of Business & Law

Aaron B. Gilbert


Auckland University of Technology - Faculty of Business & Law

Alireza Tourani-Rad


Auckland University of Technology - Faculty of Business & Law

August 25, 2011

Midwest Finance Association 2012 Annual Meetings Paper

Abstract:     
Insider trading has been subjected to increasing sanctions in many markets without completely deterring insider dealing or even, on the basis of some evidence, making it more prevalent. This suggests that other factors may impact on the prevalence of insider dealing such as culture, a system of norms and values which may enhance or undermine the laws in place. We examine the impact of culture by relating the four Hofstede (2001) cultural dimensions to the price and volume run-ups prior to a takeover announcement. Our results show that higher uncertainty avoidance, a proxy for risk aversion, deters insider dealing, although other cultural dimensions show little connection with insider trading. Our findings suggest that law makers may need to consider culture when establishing insider trading laws, specifically, stronger sanctions in low uncertainty avoiding countries.

Number of Pages in PDF File: 33

Keywords: Cultural Dimensions, Insider Dealing, Price Run-Ups

JEL Classification: G34, Z10, C21

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Date posted: September 19, 2011  

Suggested Citation

Frijns, Bart and Gilbert, Aaron B. and Tourani-Rad, Alireza, A Proclivity to Cheat: How Culture influences Illegal Insider Trading (August 25, 2011). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1929977 or http://dx.doi.org/10.2139/ssrn.1929977

Contact Information

Bart Frijns
Auckland University of Technology - Faculty of Business & Law ( email )
3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand
Aaron B. Gilbert (Contact Author)
Auckland University of Technology - Faculty of Business & Law ( email )
3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand
Alireza Tourani-Rad
Auckland University of Technology - Faculty of Business & Law ( email )
3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand
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