Download This PaperInsider Networks
40 Pages Posted: 20 Jun 2018 Last revised: 16 Aug 2024
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Insider Networks
Insider Networks
Date Written: May 21, 2018
Abstract
How do insiders respond to regulatory oversight on the use of insider information? History suggests that they form more sophisticated networks to circumvent regulation. We develop a theory of the formation and regulation of insider information networks. We show that agents with sufficiently complex networks bypass any given regulatory environment. In response, regulators employ broad regulatory boundaries to combat gaming. Tighter regulation induces agents to migrate activity from existing social networks to a core-periphery insider network. A small group of agents endogenously arise as intermediaries for the bulk of transmissions.
Keywords: JEL classification: D85, G14, G20 Network Formation, Transmission Networks, Insider Trading, Endogenous Intermediation
JEL Classification: D85, G14, G20
Suggested Citation: Suggested Citation
Selman Erol (Contact Author)
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
Michael Lee
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States