Does the Adoption of an Information-Connected Approach Reduce Insider Trading?

53 Pages Posted: 11 Sep 2008

See all articles by Yuen Teen Mak

Yuen Teen Mak

National University of Singapore (NUS) - Department of Accounting

John M. Sequeira

Watson Wyatt Worldwide

Luh Luh Lan

National University of Singapore (NUS) - Faculty of Law; National University of Singapore - Department of Strategy & Policy

Jocelyn Tan

affiliation not provided to SSRN

Date Written: July 6, 2008

Abstract

Many countries adopt either an information-connected approach or the person-connected approach to regulate insider trading. In this paper, we examine the impact of countries switching from a person-connected approach to an information-connected approach using 502 tender offer announcements in Singapore, Malaysia and Australia, over the period from 1986 to 2006. We find that illegal insider trading in Singapore decreases with the enactment of insider trading regulations. Insider trading in Malaysia, on the other hand, only decreases after the enforcement of insider trading regulations. For Australia, we observe that the enactment or enforcement of insider trading regulation has little impact on the market. Our findings show that market participants react to legislation change earlier if the regulator concerned has a strong reputation for enforcement. In other words, the timing at which the market can be expected to react to legislation changes is a function of a government's reputation for enforcement.

Keywords: Insider trading, Governance, Event-Study

JEL Classification: G34, G14

Suggested Citation

Mak, Yuen Teen and Sequeira, John M. and Lan, Luh Luh and Tan, Jocelyn, Does the Adoption of an Information-Connected Approach Reduce Insider Trading? (July 6, 2008). 21st Australasian Finance and Banking Conference 2008 Paper. Available at SSRN: https://ssrn.com/abstract=1156143 or http://dx.doi.org/10.2139/ssrn.1156143

Yuen Teen Mak

National University of Singapore (NUS) - Department of Accounting ( email )

BIZ2 Building, #03-32
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Singapore 119591
Singapore
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John M. Sequeira (Contact Author)

Watson Wyatt Worldwide ( email )

875 Third Avenue
New York, NY 10022
United States

Luh Luh Lan

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

National University of Singapore - Department of Strategy & Policy ( email )

15 Kent Ridge Drive, Singapore
Singapore 119245
Singapore

Jocelyn Tan

affiliation not provided to SSRN ( email )

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