Ethical Issues in Insider Trading: Case Studies

Abstract:     
Insider trading has received a bad name in recent decades. The popular press makes it sound like an evil practice where those who engage in it are totally devoid of ethical principles. Yet not all insider trading is illegal and some studies have concluded that certain kinds of insider trading are actually beneficial to the greater investment community. Some scholars in philosophy, law and economics have disputed whether insider trading should be punished at all while others assert that it should be illegal in all cases. Appeals often tend to be based on emotion rather than logic and academic analysis. This paper reviews the literature on insider trading and applies utilitarian ethics and rights theory to some recent case studies of insider trading in an attempt to determine which forms of insider trading are ethically acceptable.

Number of Pages in PDF File: 28

Keywords: Ethics, Insider Trading, Martha Stewart, corporate governance, utilitarianism, welfare

JEL Classification: D63, G34, K22

working papers series