Insider Trading: An Ethical Analysis

International Journal of Finance, Vol. 24, No. 1, p. 7070, 2012

15 Pages Posted: 4 Mar 2013

See all articles by Robert W. McGee

Robert W. McGee

Fayetteville State University - Department of Accounting

Yeomin Yoon

Seton Hall University - W. Paul Stillman School of Business

Date Written: December 1, 2012

Abstract

Insider trading has received a great deal of bad press in recent decades. Nearly every article in the popular press that has been written about it views the practice in a negative light. However, the economics and legal literature are mixed on the issue. This article examines the economics and legal literature and applies several sets of ethical principles with the goal of determining when insider trading constitutes unethical conduct and when it should be prohibited. The conclusion is that the key to determining when the practice should be prohibited should not depend upon a utilitarian analysis because utilitarian approaches cannot provide clear guidance. A better approach would be to determine whether a fiduciary duty has been breached or whether rights have been violated.

Keywords: insider trading, ethics, utilitarian, rights theory, virtue ethics, fiduciary duty, general welfare, positive-sum game, level playing field

JEL Classification: D23, D60, D61, D63, G14, G18, G30, G34, K11, K20, K22

Suggested Citation

McGee, Robert W. and Yoon, Yeomin, Insider Trading: An Ethical Analysis (December 1, 2012). International Journal of Finance, Vol. 24, No. 1, p. 7070, 2012. Available at SSRN: https://ssrn.com/abstract=2227943

Robert W. McGee (Contact Author)

Fayetteville State University - Department of Accounting ( email )

Fayetteville, NC 28301
United States

HOME PAGE: http://robertwmcgee.com

Yeomin Yoon

Seton Hall University - W. Paul Stillman School of Business ( email )

400 South Orange Avenue
Finance Department
South Orange, NJ 07079
United States
973-761-9229 (Phone)

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