David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
Learn more about PhilPapers
The common view is that insider trading is always unethical and illegal. But such is not the case. Some forms of insider trading are legal. Furthermore, applying ethical principles to insider trading causes one to conclude that it is also sometimes ethical. This chapter attempts to get past the hype, the press reports and the political grandstanding to get to the truth of the matter. The author applies two sets of ethical principles – utilitarianism and rights theory – in an attempt to determine when, and under what circumstances, insider trading is ethical. The views of Henry Manne, an early proponent of insider trading, are critically examined, as are the major arguments against insider trading. Is insider trading good for the company if it is used as a form of executive compensation, which makes it possible to pay lower salaries than would otherwise be the case? Does insider trading cause the stock market to work more efficiently? If insider trading does increase efficiency, is that sufficient to call for its total legalization, or are there other things to be considered? Several arguments against insider trading have been put forth over the last few decades but there are problems with all of them. One of the main arguments is the fairness argument. The problem with this argument is that different people have different definitions of unfairness. A closely related argument is the level playing field argument, which advocates wider dissemination of information so that it is less asymmetric. One problem with the level playing field argument is that it is better applied to sporting competitions than to trading in information. Some economists argue that forcing the disclosure of nonpublic information can actually result in more harm than good and must necessarily involve the violation of property rights. Other arguments examined in this chapter include the fiduciary duty argument, the problem of outside traders, the misappropriation doctrine and the restrictions that insider trading laws place on freedom of speech and press. The chapter concludes by setting forth some principles or guidelines to determine when insider trading should be punished and when it should not.
|Keywords||No keywords specified (fix it)|
|Categories||categorize this paper)|
Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
|Through your library||
References found in this work BETA
No references found.
Citations of this work BETA
No citations found.
Similar books and articles
Mohammad Abdolmohammadi & Jahangir Sultan (2002). Ethical Reasoning and the Use of Insider Information in Stock Trading. Journal of Business Ethics 37 (2):165 - 173.
Patricia H. Werhane (1991). The Indefensibility of Insider Trading. Journal of Business Ethics 10 (9):729 - 731.
Patricia H. Werhane (1989). The Ethics of Insider Trading. Journal of Business Ethics 8 (11):841 - 845.
Richard L. Lippke (1993). Justice and Insider Trading. Journal of Applied Philosophy 10 (2):215-226.
E. Mine Cinar (1999). The Issue of Insider Trading in Law and Economics: Lessons for Emerging Financial Markets in the World. [REVIEW] Journal of Business Ethics 19 (4):345 - 353.
Peter-Jan Engelen & Luc Van Liedekerke (2007). The Ethics of Insider Trading Revisited. Journal of Business Ethics 74 (4):497 - 507.
Jennifer Moore (1990). What is Really Unethical About Insider Trading? Journal of Business Ethics 9 (3):171 - 182.
Robert W. McGee (2008). Applying Ethics to Insider Trading. Journal of Business Ethics 77 (2):205 - 217.
Yulong Ma & Huey-Lian Sun (1998). Where Should the Line Be Drawn on Insider Trading Ethics? Journal of Business Ethics 17 (1):67-75.
Robert W. McGee (2010). Analyzing Insider Trading From the Perspectives of Utilitarian Ethics and Rights Theory. Journal of Business Ethics 91 (1):65 - 82.
Added to index2009-01-28
Total downloads73 ( #42,643 of 1,725,153 )
Recent downloads (6 months)1 ( #349,161 of 1,725,153 )
How can I increase my downloads?