Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence
Laura Nyantung Beny
University of Michigan Law School
William Davidson Institute Working Paper No. 741
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.
Number of Pages in PDF File: 44
Keywords: Insider trading law, Market efficiency, Ownership structure, Law and finance, Comparative capital markets
JEL Classification: K22, G14, G15, G18, G32
Date posted: February 22, 2005
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