Insider Trading Laws, Learning and Firm Valuation: A Global Perspective

35 Pages Posted: 17 Aug 2013 Last revised: 14 Nov 2015

See all articles by Udomsak Wongchoti

Udomsak Wongchoti

Massey University - School of Economics and Finance

Evgeny Radetsky

University of Memphis

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics

Date Written: August 15, 2013

Abstract

We argue that a country’s institutional setting can affect investor learning and thereby stock valuation and market stability. For a global sample of firms we find that the speed with which analyst forecast errors decline and the speed with which M/B valuation attains its equilibrium value with progression in a firm’s age improves with active insider trading law enforcement. This effect is more pronounced among capital markets with better regulatory infrastructure based on World Governance Indicators (WGI) index. We also provide updated insider trading law enactment and enforcement dates (up to 2013) to Bhattacharya and Daouk (2002), of which their survey covered up to March 1999.

Keywords: Market to book ratio, learning, capital market environment

JEL Classification: G12, G14, G15

Suggested Citation

Wongchoti, Udomsak and Radetsky, Evgeny and Jain, Pankaj K., Insider Trading Laws, Learning and Firm Valuation: A Global Perspective (August 15, 2013). 26th Australasian Finance and Banking Conference 2013, Available at SSRN: https://ssrn.com/abstract=2310970 or http://dx.doi.org/10.2139/ssrn.2310970

Udomsak Wongchoti (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Evgeny Radetsky

University of Memphis ( email )

Memphis, TN 38152
Memphis, TN usa 38152-3370
United States

Pankaj K. Jain

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States

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