47 Pages Posted: 22 Dec 2000
The existence and the enforcement of insider trading laws in stock markets is a phenomenon of the 1990s. A study of the 103 countries that have stock markets reveals that insider trading laws exist in 87 of them, but enforcement - as evidenced by prosecutions - has taken place in only 38 of them. Before 1990, the respective numbers were 34 and 9.
Does this matter? We find that the cost of equity in a country, after controlling for a number of other variables, does not change after the introduction of insider trading laws, but decreases significantly after the first prosecution.
Keywords: Insider trading, cost of equity, international finance
JEL Classification: G14, G15
Suggested Citation: Suggested Citation
Bhattacharya , Utpal and Daouk, Hazem, The World Price of Insider Trading. Journal of Finance, February 2002. Available at SSRN: https://ssrn.com/abstract=249708