Insider Trading with Private Information and Moral Hazard
Posted: 20 Dec 2007
This paper studies the trading decisions of an insider who has both private information about firm value and actions that directly affect this value. An irrelevance result obtains. Contrary to the theme in some of the existing literature on corporate governance, I do not find that liquidity impairs effort provision. Increases in liquidity are shown to increase variance of effort while leaving the mean effort unchanged.
Keywords: Insider trading, monitoring, governance
JEL Classification: G14, G32, G34
Suggested Citation: Suggested Citation