Insiders and the Law: The Impact of Regulatory Change on Insider Trading

Gilbert, Aaron; Tourani-Rad, Alireza and Wisniewski, Tomasz Piotr (2007). Insiders and the Law: The Impact of Regulatory Change on Insider Trading. Management International Review, 47(5) pp. 745–765.

DOI: https://doi.org/10.1007/s11575-007-0043-z

Abstract

Abstract and Key Results

- Despite the importance of insider trading laws in promoting a strong financial market, the impact of regulations in minimizing the detrimental effects of insider trading is unsettled.

- We add to the literature by examining the impact of the introduction of the Securities Market Amendment Act 2002 in New Zealand on several aspects of the market, namely bid-ask spreads, liquidity, price volatility and the cost of capital.

- We find strong evidence of predicted reductions in the cost of capital, bid-ask spreads and volatility accompanied by increases in liquidity. We conclude that the change in regulations has had a positive impact on the market.

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