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Do Investors Value Insider Trading Laws? International Evidence

dc.contributor.authorBeny, Laura Nyantungen_US
dc.date.accessioned2007-10-25T20:11:12Z
dc.date.available2007-10-25T20:11:12Z
dc.date.issued2006-08-01en_US
dc.identifier.otherRePEc:wdi:papers:2006-837en_US
dc.identifier.urihttps://hdl.handle.net/2027.42/57217en_US
dc.description.abstractThe article presents a simple agency model of the relationship between corporate valuation and insider trading laws. The article then investigates the model’s three testable hypotheses using firm-level data from a cross-section of developed countries. I find that more stringent insider trading laws and enforcement are associated with greater corporate valuation among the sample firms in common countries, while they are generally irrelevant to corporate valuation for the sample firms in civil law countries. This puzzling dichotomy is robust to various alternative specifications and to controlling for a wide range of potentially omitted variables. The result for the firms in common law countries is consistent with the claim that insider trading laws can help to reduce corporate agency costs. I also find that insider trading laws and cash flow ownership appear to be complementary means to reduce agency costs, contrary to my hypothesis that they are substitute mechanisms for controlling agency costs; however, this result is generally statistically insignificant. Finally, I confirm prior findings of an “incentive effect” of greater cash flow ownership by controlling shareholders.en_US
dc.format.extent321667 bytes
dc.format.extent1802 bytes
dc.format.mimetypeapplication/pdf
dc.format.mimetypetext/plain
dc.relation.ispartofseries837en_US
dc.subjectCorporate Finance and Law, Governance, Valuation, Capital Budgeting, Investment Policy, Comparative Law, International Businessen_US
dc.subject.otherG30, G38, K22en_US
dc.titleDo Investors Value Insider Trading Laws? International Evidenceen_US
dc.typeWorking Paperen_US
dc.subject.hlbsecondlevelEconomicsen_US
dc.subject.hlbtoplevelBusinessen_US
dc.contributor.affiliationumWilliam Davidson Instituteen_US
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/57217/1/wp837 .pdfen_US
dc.owningcollnameWilliam Davidson Institute (WDI) - Working Papers


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