Abstract
Growth of the private sector and privatization of state companies around the world have led to the emergence of various stock markets, some of which are depicted by insider trading. Law literature uses the arguments of unfairness, breach of fiduciary rights and damage to others to define and rule against insider trading. Economic literature can be used to interpret insider trading from other perspectives. This study argues that the question of insider trading in developing markets can be resolved by the extent stock markets generate externalities and are public goods. It advocates structural changes in the developing markets and examines the conditions under which the Coase Theorem would work.
Similar content being viewed by others
References
Bagnoli, M. and N. Khanna: 1992, ‘Insider Trading in Financial Signalling Models’, The Journal of Finance XLVII(5), 1905–1934.
Boatright, J. R.: 1992, ‘Conflict of Interest: An Agency Analysis’, in N. E. Bowie and R. E. Freeman (eds.), Ethics and Agency Theory (Oxford University Press, New York, 1992), pp. 187–203.
Chjen, V. A., Chairman of the Committee for Management of State Property: ‘Principle Approaches to Privatization and Its Role in the Ongoing Reform’ Speech given in Conference on ‘Privatization in Uzbekistan: Opportunities for Partnership’, Geneva, Switzerland, October 26–27, 1995.
Coase, R.: 1960, ‘The Problem of Social Cost’, Journal of law and Economics (3, October 1960), 1–44.
Filatov, A.: 1994, ‘Unethical Business Behavior in Post-Communist Russia: Origins and Trends’, Business Ethics Quarterly 4(1), 11–15.
Hausman, D. M. and M. S. McPherson: 1993, ‘Taking Ethics Seriously: Economics and Contemporary Moral Philosophy’, Journal of Economic Literature XXXI (June), 671–731.
Hu, J. and T. H. Noe: 1997, ‘Insider Trading, Costly Monitoring and Management Incentives’, Federal Reserve Bank of Atlanta Working Paper, 97-2, May.
Hume, D.: 1752, An Inquiry Concerning the Principles of Morals (London).
Husted, B. W.: 1994, ‘Honor Among Thieves: A Transaction-Cost Interpretation of Corruption in Third World Countries’, Business Ethics Quarterly 4(1), 17–27.
Leftwich, R. W. and R. E. Verrecchia: 1983, ‘Insider Trading and Manager' Choice Among Risky Projects’, University of Chicago Center for Research in Security Prices, working paper, #63.
Manove, M.: 1989, ‘The Harm from Insider Trading and Speculation’, Quarterly Journal of Economics 104, 823–846.
Meulbroek, Lisa K.: 1992, ‘An Empirical Analysis of Illegal Trading’, The Journal of Finance V. XLVII(5), 1661–1699.
Mill, J. S.: 1861, Utilitarianism (London).
Moore, J.: 1990, ‘What is really Unethical About Insider Trading?’, Journal of Business Ethics 9, 171–182.
Moran, Mark and Gary John Previts: 1984, ‘The SEC and the Profession, 1934–1984: The Realities of Self Regulation’, Journal of Accountancy 158 (July 1984), 68–80.
Noe, T. H.: 1995, ‘Insider Trading and the Problem of Corporate Agency’, Federal Reserve Bank of Atlanta Working Paper, 95-2, May.
Rachels, James: 1983, The Elements of Moral Philosophy, 2nd edition (McGraw Hill, New York).
Rossouw, G. J.: Jan 1994, ‘Business Ethics in Developing Countries’, Business Ethics Quarterly 4(1), 43–52.
Shin, J.: 1996, ‘The Optimal Regulation of Insider Trading’, Journal of Financial Intermediation 5, 49–73.
State Committee of the Republic of Uzbekistan for the Management of State Property and Support for Entrepreneurial Development (SCRU), ‘Uzbekistan: Approach, Achievements, Targets Ahead’, Internal Document, 1995.
Taylor, J.: ‘CFTC Flexes Regulatory Muscle Unnerving the Futures Industry’, Wall Street Journal (8/5/1993), C1.
UNDP/UNIDO, Privatization Newsletter: Uzbekistan, Issues 1–5, December 1994–December 1995.
Williamson, Oliver E.: 1975, Markets and Hierarchies: Analysis and Antitrust Implications (The Free Press, New York, 1975).
Ziemba, W. T.: 1994, ‘World Wide Security Market Regularities’, European Journal of Operational Research 74, 198-229.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Cinar, E.M. The Issue of Insider Trading in Law and Economics: Lessons for Emerging Financial Markets in the World. Journal of Business Ethics 19, 345–353 (1999). https://doi.org/10.1023/A:1005913602588
Issue Date:
DOI: https://doi.org/10.1023/A:1005913602588