Insider Trading Research Articles

Judge Ideology and Opportunistic Insider Trading

Abstract Although federal judges are the ultimate arbiters of insider trading enforcement, the role of their political ideology in insider trading is unclear. Using the partisanship of judges’ nominating presidents to measure judge ideology, we first document that liberal judges are associated with heavier penalties in insider trading lawsuits than conservative judges. Next, we find that firms located in circuits with more liberal judges have fewer opportunistic insider sales. Cross-sectional analyses show that this deterrent effect is stronger when managers face a higher risk of insider trading lawsuits. Finally, we find that the Securities and Exchange Commission considers judges’ ideology when selecting litigation forums.

Legal Review of the Authority of Financial Services Authorities in Crime Practicesinsider Trading in Capital Markets in the Development of Information Technology

The practice of insider trading constitutes a violation or crime within the Indonesian capital market, necessitating a legal role to safeguard investors against frequent violations in the market. This research delves into the legal role in addressing insider trading practices within the Indonesian capital market. The objectives include identifying the characteristics of insider trading in the Indonesian capital market and discerning the legal responsibilities associated with such practices. The research addresses the following issues: First, the characteristics of insider trading in the Indonesian capital market; and second, legal responsibilities concerning insider trading practices in the Indonesian capital market. This study employs a deductive-analytic juridical-normative approach. The analysis reveals that, firstly, the provisions on insider trading in capital markets law have not effectively ensured maximum protection for investors in Indonesia. Secondly, there are hindrances to offering comprehensive legal protection to investors in light of insider trading practices within the capital market.

NOVICE INVESTORS AND PROTECTION FROM SHORT SELLING CARRIED OUT BY SECURITIES BROKERS

Domestic investors in the capital market until the end of July 2023 reached 11.4 million, and the increase in investors is seen as a positive development. However, on the other hand, Verdi Ikhwan, Head of the Research Division at the Indonesia Stock Exchange (IDX), stated that the level of capital market literacy has decreased from 4.92% to 4.11%. Meanwhile, inclusion has increased from 1.55% to 5.19%. It was also found that the Indonesia Stock Exchange (IDX) imposed sanctions on two securities for conducting short selling transactions without the exchange's approval. These two securities are PT Reliance Sekuritas Indonesia Tbk. (RELI) and PT Valbury Sekuritas Indonesia. The literacy level significantly influences the choices of novice investors in their activities in the capital market, particularly those who use brokers in stock trading. In this research, two problem formulations are posed: "What are the Capital Market Crimes in Indonesia?" and "How is the Protection for Novice Investors Against Short Selling Conducted by Securities Brokers?" The research utilizes normative and descriptive-analytical research methods. The study concludes that prohibited capital market crimes according to the Capital Market Law (UUPM) include market manipulation, insider trading, front running, and short selling. The UUPM regulates prohibitions in the practice of capital market trading. It is essential to remember that these regulations align with the law's purpose of safeguarding public order established by official bodies

Analysis of the Influence of the Announcement of Stock Splits on Insider Trading Indicators in the Indonesian Stock Exchange Environment for the 2013-2023 Period

The phenomenon of stock split is a corporate action to increase the number of shares outstanding in the market with the aim of making the stock price more affordable for investors. This practice is often carried out by company management to enhance stock liquidity and attract investor interest without necessarily increasing net income. However, although Stock Splits are generally considered a positive policy, some studies indicate that in some cases, Stock Splits can be exploited for insider trading activities, especially in markets with weak regulations or emerging markets. The aim of this research is to find out whether there are indicators of insider trading from stock split policies based on similar behavior in capital markets where capital market regulations are still not well regulated ( emerging markets ). By using the event study method, this research did not find any indication of insider trading because there was no cumulative abnormal return in the positive direction before the stock split was executed. By using multiple regression analysis, this research confirms that there is no indication of insider trading which is influenced by the level of state ownership, small company asset size and the tendency to split shares with a high split ratio as has been tested by previous research.

U. S. vs. EU Insider Trading Regulation: Risks and Challenges from a European Perspective

Abstract 822In an ever more globalized financial market, investors are increasingly exposed to regulation and enforcement by multiple jurisdictions with varying rules, including different insider trading regimes. From a European perspective, potential exposure to the U. S. insider trading regime is particularly challenging. Especially for the non-U. S. practitioner, the U. S. insider prohibition is very complex and offers little legal certainty. And this uncertainty is all the more problematic for Europeans because the U. S. insider ban applies extraterritorially. Even more worrying, violations of the U. S. insider trading regime are often met with harsh consequences, ranging from stiff prison sentences to ruinous financial penalties. First, this article broadly outlines the contours of the U. S. insider trading regime as well as the current state of play for insider trading enforcement under U. S. law. Second, it outlines the fearsome (extra-) territorial reach of the U. S. insider trading ban, to allow a better assessment of a European’s potential exposure to the U. S. insider trading regime in different situations. Third, it highlights the main differences between the U. S. and the EU insider trading regulations, to identify the areas in which market participants on both sides of the Atlantic should be particularly cautious.

Ricardo’s finances and Waterloo: legends by Samuelson and others lack historical evidence

Abstract Paul Samuelson and others suggested that Ricardo (‘the richest economist in history’) made a life-changing coup on the Stock Exchange after the Battle of Waterloo (1815), but archives reveal that Ricardo amassed his fortune more gradually, often by small profit rates upon large investments, as a jobber on the Stock Exchange and a contractor for seven British Loans. The 1815 Loan generated exceptional profits for Ricardo, but not the million sterling mentioned in unreliable legends about Ricardo or Rothschild. Such legends neglected the stock price statistics, the suboptimal timing of Ricardo’s transactions in 1815 and the dominant role of the Baring-Angerstein consortium, which took a much larger part of the Loans than Ricardo’s consortium. Insufficient attention was also paid to the special year 1813, when Britain exceptionally launched not one, but two very profitable Loans. After his large 1813 profits, Ricardo started contemplating his retirement and bought Gatcombe Park in 1814. Samuelson neglected this and overestimated the influence of 1815 events. Moreover, Samuelson claimed that today Ricardo might be prosecuted for using unscrupulous market manipulation and inside information. Archives and statistics show that Samuelson’s allegations lack historical evidence.

Juridical Review of Investor Protection in Insider Trading Regulations in the Indonesian Capital Market

This article will discuss the protection of investors in the event of insider trading committed by persons who do not have a fiduciary duty relationship with the issuer. The crime of insider trading is difficult to prove and the perpetrator of the crime can be released from the law, which is a person outside of fiduciary duty. Therefore, the author examines the juridical review of investor protection in the event of insider trading whose perpetrators are people outside of fiduciary duty in the capital market using a legislative and conceptual approach. The findings of this research are that in order for the perpetrators outside the fiduciary duty to be sanctioned, capital market regulation in Indonesia must embrace misappropriation theory. As well as the responsibility in order to protect investors is an individual responsibility, where the responsibility is explained in Article 104 of the capital market law.

Investment Decision among Intercontinental, Hilton and Louis Vuitton

Investment is very important for both individuals and the economy and society. A good investment can achieve wealth growth or create more social welfare. In this context, the main purpose of this article is to study how different investors invest in Hilton, Intercontinental, and Louis Vuitton to achieve their investment objectives. This article will first introduce three companies. In addition, this study collected indicator data on risk, profit margin, and market ratio from multiple perspectives, and after comprehensive calculations, formed the analytical basis for this study. On the basis of data, this article summarizes the asset selection of value investors, income investors, PEG investors, index investors, ROA investors, DCF investors, momentum investors, insider trading, and stock repurchases. The results show that there are significant differences in the preferences of different investors towards the three companies.

Legal Collusion: Legal Consciousness under China’s One-Child Policy

Why would one person facilitate a community member’s evasion of the law, even when there is nothing tangible in it for themselves? In this article, I draw on stories in Chinese villages under the one-child policy to suggest that the lack of moral legitimacy in a particular law motivates people to help others overcome legal or policy restrictions, especially when there are existing connections and trust among them. It reveals the influential impact of law’s moral legitimacy on people’s responses to legal evasion and the relational nature of legal consciousness. An individual’s existing connections with and trust in those who evade the law often reinforce the sense of obligation to take matters into one’s own hands to help right the wrong that has been done to them. Nevertheless, the consequences of participating in such collusion may reshape expectations and obligations within the community, pushing law-evading citizens to minimize risks for those who are willing to facilitate their evasion of the law. The fluid nature of interpersonal relationships in Chinese society also means that when things go wrong, supportive members may in turn use their insider information against the law-evading citizen to seek revenge or teach them a lesson.

The financial impact of foodborne illness outbreaks at restaurants: Chipotle Mexican Grill

AbstractAs demand for food away from home increases, outbreaks at restaurants become an important source of food‐related illness. In the United States, over 60% of foodborne illness outbreaks occur at restaurants and 97% of outbreaks are limited to a single state. Despite this, we currently know little about restaurant outbreaks and in particular, single‐state outbreaks are not well understood. We use Chipotle Mexican Grill's eight outbreaks (2015–2018) to evaluate the media and stock market responses to both single and multistate outbreaks. Using news and stock market data, we provide evidence that multistate outbreaks brought swift stock price declines and single‐state outbreaks' impact depended on their timing, rather than their severity. Before Chipotle's more well‐known, multistate outbreaks, the firm's single‐state outbreaks brought little reporting and no financial losses, whereas after the multistate food safety events, single‐state events resulted in national media coverage and large financial impacts. Our findings are consistent with the literature on food scares that can result in chronic low‐level anxiety, which can bring about a large resurgence of concern for smaller outbreaks. The lessons learned from Chipotle's case underscore the importance of investment in outbreak prevention. [G14 (Information and Market Efficiency, Event Studies, Insider Trading)].

Insider Trading : A comparative analysis of the regulatory models of India with the US and the UK

This research paper deals with insider trading and the various ill effects in brings on to the society and the corporate entities and the companies and suggests some amendments and measures to curb this illegal practice. This paper would also be comparing with the frameworks of the US and the UK.

CEO power and stock price crash risk in India: the moderating effect of insider trades

PurposeThis study aims to explore the relationship between chief executive officer (CEO) power and stock price crash risk in India. Furthermore, it seeks to analyse how insider trades may moderate the impact of CEO power on stock price crash risk.Design/methodology/approachA study of 236 companies from the S&P BSE 500 Index (2014–2023) have been analysed through pooled ordinary least square (OLS) regression in the baseline analysis. To enhance the results' reliability, robustness checks include alternative methodologies, such as panel data regression with fixed-effects, binary logistic regression and Bayesian regression. Additional control variables and alternative crash risk measure have also been utilised. To address potential endogeneity, instrumental variable techniques such as two-stage least squares (IV-2SLS) and difference-in-difference (DiD) methodologies are utilised.FindingsStakeholder theory is supported by results revealing that CEO power proxies like CEO duality, status and directorship reduce one-year ahead stock price crash risk and vice versa. Insider trades are found to moderate the link between select dimensions of CEO power and stock price crash risk. These findings persist after addressing potential endogeneity concerns, and the results remain consistent across alternative methodologies and variable inclusions.Originality/valueThis study significantly advances research on stock price crash risk, especially in emerging economies like India. The implications of these findings are crucial for investors aiming to mitigate crash risk, for corporations seeking enhanced governance measures and for policymakers considering the economic and welfare consequences associated with this phenomenon.

Insider Trading in European Law – from financial instruments to crypto-assets

Insider Trading in European Law – from financial instruments to crypto-assets

Conflict of Interest Between Managers and Partners in Cooperative Companies and Solutions

The conflict of interest between managers and partners in cooperative companies is an important issue that requires discussion and examination. Accordingly, the aim of the present article is to explore this issue and provide solutions in this regard. The current article is descriptive-analytical. The materials and data are qualitative, and note-taking has been used for data and content collection. The most significant conflicts of interest between managers and partners in cooperative companies include transactions between managers and the company, receiving loans from the company, competition with the company, accepting gifts and privileges, appointing individuals based on personal and familial relationships, serving on the board of competing companies, and personal use of the company's assets. The primary solutions to these conflicts include granting partners the authority to dismiss managers, prohibiting transactions between managers and the company, preventing managers from engaging in insider trading, prohibiting the granting of loans to managers, creating positive incentives for managers, imposing negative incentives, limiting the duration of managerial positions, restricting managers' participation in meetings and decision-making processes, limiting managerial roles, requiring managers to disclose personal interests in decisions, and banning the acceptance of gifts and privileges. The current laws have not adequately addressed the conflict of interest between managers and partners in cooperative companies. Considering the increasing development of cooperative companies and their significant economic impact, the enactment of relevant laws is essential.

Beyond the Bottom Line: Balancing Profits and Ethical Conduct in the Financial Sector

This study explores the complex field of finance ethics, providing insights into the many ethical concerns that are prevalent within the financial sector. This study aims to analyze and comprehend the moral quandaries often encountered by professionals in the financial sector, therefore delving into the ethical aspects of financial processes. The study underscores the widespread presence of ethical dilemmas within the realm of finance, emphasizing its important arguments and conclusions. This study aims to identify and analyze the prominent ethical challenges that emerge within the financial industry, including conflicts of interest, insider trading, risk management, and responsible investment. This text examines the ramifications of unethical conduct within the financial sector and emphasizes the significance of ethical decision-making in maintaining the industry's stability and integrity. This study utilizes a rigorous methodology that incorporates a wide range of data sources, including both quantitative and qualitative data. This study involves a comprehensive examination of relevant scholarly works, empirical case studies, and survey data in order to assess and integrate the ethical dimensions within the field of finance. Moreover, it actively participates in ethical analyses and deliberations in order to put forth prospective answers and tactics aimed at cultivating a more ethical financial milieu. This study intends to add to the continuing conversation on the ethics of finance, presenting insights and suggestions that may serve as a compass for ethical decision-making within the business.

Phân tích thực trạng các hành vi thao túng giá trên thị trường chứng khoán Việt Nam

Prices manipulating on the stock market is considered as intentionally behaviour that impacting on stock price via violating the law of supply and demand or other activities, in order to achieve abnormal return for individual or group of investors. This article analyzes the current situation of stock price manipulation actions taking place in the period 2015- 2022. By studying real events and examining common methods used to manipulate prices, including: fraudulent financial statements; illegal insider trading; wash trading and spreading false rumors on Vietnam stock exchange, the results show that the number of information disclosure violations predominates and continuously increases over the years. The number of cases related to price manipulation by wash trading and insider trading account for a very small proportion because the nature of these cases is difficult to determine and complex. These results contribute further empirical evidence and critical voices to build a sustainable and more transparent stock market in the future.

Firm-level Sentiment and Insider Trading

Firm-level Sentiment and Insider Trading

Financial mechanism in the system of countering unfair practices in the securities market

The subject of this study is the system of countering insider transactions and manipulation in the securities market in terms of its mechanisms. The purpose of this work is to determine the place of the financial mechanism of counteraction and its role in the system of combating unfair practices. The securities market is the most important element ensuring the development of the economy. Today, one of the main problems of its regulation in Russia is the search for effective mechanisms to combat illegal practices. As a result of such activities, the financial security of participants is put at risk, and confidence in the market is reduced. The issue of finding and implementing new mechanisms to improve the effectiveness of control over the activities of participants is becoming urgent. In order to increase the effectiveness of the market regulation system in terms of control over insider trading and manipulation, the author proposes the introduction of a financial mechanism to counter insider trading and manipulation in the securities market. The methods of modeling and analogy, classification, comparison, system analysis, synthesis and generalization were used in the work. A comparative analysis of counteraction systems in countries with the world's leading stock exchanges has been carried out. The results show that each of the considered systems has a financial mechanism of counteraction, expressed not only by strict fines related to the amount of damage caused, but also by additional amounts of compensation, which is absent in domestic practice. The author analyzes the existing system of regulation of the Russian securities market, identifies its components, and highlights the main disadvantages. In addition, the analysis of the system showed that such a component as a financial counteraction mechanism has not been fully formed to date. The existing measures do not ensure the effectiveness of the fight against illegal practices. The financial mechanism of counteraction in Russian practice is fragmented, and the existing fines have no economic justification and are directly related to the damage caused to the market. In addition, no other measures are provided to compensate the losses received by the participants. Thus, in this paper, the concept of a financial mechanism for countering insider and manipulative activities is proposed, and its place in the Russian securities market regulation system is determined.

Operational Losses and Insider Trading: Evidence from U.S. Financial Institutions

Operational Losses and Insider Trading: Evidence from U.S. Financial Institutions

The Potential Impact of the CSRD and Other Sustainability Legislation on Listed Companies

As investors increasingly take into account environmental, social and governance (ESG) aspects of their investments, sustainability has certainly been making its mark on listed companies and the capital markets more generally. Considering their scope of application, recent sustainability legislation is likely to further the importance of sustainability for listed companies and the capital markets more generally. The Corporate Sustainability Reporting Directive (CSRD) is the directive with probably the most impact. This publication discusses the potential impact of the CSRD on companies (to be) listed on a regulated market as well as certain other sustainability considerations for listed companies. Sustainability, ESG, CSRD, CSDDD, sustainability reporting, inside information, gender diversity, prospectus disclosure, listed companies, SME growth markets