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American Law and Economics Review 2005 7(1):144-183; doi:10.1093/aler/ahi002
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© The Author 2005. Published by Oxford University Press on behalf of the American Law and Economics Association. All rights reserved. For permissions, please e-mail: journals.permissions@oupjournals.org

Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence

Laura Nyantung Beny

University of Michigan Law School

Address correspondence to: Laura Nyantung Beny, 625 South State Street, Ann Arbor, MI 48109; E-mail: lbeny{at}umich.edu.

Despite the long-standing insider trading debate, there is little empirical research on insider trading laws, especially in a comparative context. The article attempts to fill that gap. I find that countries with more prohibitive insider trading laws have more diffuse equity ownership, more accurate stock prices, and more liquid stock markets. These findings are generally robust to controlling for measures of disclosure and enforceability and suggest that formal insider trading laws (especially their deterrent components) matter to stock market development. The article suggests further avenues of empirical research on the specific mechanisms through which insider trading laws might matter and the political economy of their adoption.


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