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The World Price of Insider Trading

47 Pages Posted: 22 Dec 2000  

Utpal Bhattacharya

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management

Hazem Daouk

Cornell University - School of Applied Economics and Management

Abstract

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

Bhattacharya , Utpal and Daouk, Hazem, The World Price of Insider Trading. Journal of Finance, February 2002. Available at SSRN: https://ssrn.com/abstract=249708

Utpal Bhattacharya (Contact Author)

Hong Kong University of Science & Technology (HKUST) - HKUST School of Business and Management ( email )

Clear Water Bay
Kowloon
Hong Kong

Hazem Daouk

Cornell University - School of Applied Economics and Management ( email )

446 Warren Hall
Ithaca, NY 14853
United States
331-45-78-63-88 (Fax)

HOME PAGE: http://courses.cit.cornell.edu/hd35/

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