Profits to opportunistic insider trading before and after the Dodd-Frank act of 2010

IF 2 Q2 BUSINESS, FINANCE

Journal of Financial Regulation and Compliance Pub Date : 2021-07-31 DOI:10.1108/jfrc-02-2021-0018

Partha Gangopadhyay, Ken Yook

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Abstract

Purpose The authors examine if opportunistic insider trading profits decrease after the enactment of the Dodd-Frank Act (DFA) in 2010. The DFA expands legal prohibitions on insider trading in the USA. Design/methodology/approach The authors identify opportunistic insider trades following a method that is outlined in Cohen et al. (2012). The authors examine univariate statistics and perform multivariate regression tests to examine opportunistic trading profits before and after the DFA. Similar multivariate regression tests have been used widely in the literature to examine the profitability of insider trades. Findings The authors find that opportunistic insider purchases were highly profitable before the DFA. Profits after opportunistic purchases were significantly lower after the DFA. Opportunistic insider sales were contrarian trades both before and after the DFA. However, share prices kept increasing after insiders sold their shares. Originality/value To the best of the authors’ knowledge, the paper is the first study that compares the profitability of opportunistic insider trades, as identified by Cohen et al., before and after the DFA. The study contributes to the literature that finds that insiders change their strategic trading behavior when the potential costs of the illegal trading increase due to regulatory action.

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2010年多德-弗兰克法案前后机会主义内幕交易的利润

目的研究2010年多德-弗兰克法案(Dodd-Frank Act, DFA)颁布后机会主义内幕交易利润是否下降。DFA扩大了美国对内幕交易的法律禁令。设计/方法/方法作者根据Cohen等人(2012)概述的方法识别机会主义内幕交易。作者检验了单变量统计数据，并进行了多变量回归检验，以检验DFA前后的机会交易利润。类似的多元回归检验在文献中被广泛用于检验内幕交易的盈利能力。研究发现:作者发现，在DFA出台之前，机会主义的内幕交易是非常有利可图的。在DFA之后，投机购买的利润明显下降。机会主义的内幕交易在DFA之前和之后都是反向交易。然而，在内部人士抛售股票后，股价持续上涨。原创性/价值据作者所知，这篇论文是第一个比较机会主义内幕交易盈利能力的研究，正如科恩等人在DFA之前和之后所确定的那样。该研究有助于文献发现，当非法交易的潜在成本因监管行动而增加时，内幕人会改变其策略交易行为。

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来源期刊

Journal of Financial Regulation and Compliance BUSINESS, FINANCE-

CiteScore

2.60

自引率

11.10%

发文量

期刊介绍： Since its inception in 1992, the Journal of Financial Regulation and Compliance has provided an authoritative and scholarly platform for international research in financial regulation and compliance. The journal is at the intersection between academic research and the practice of financial regulation, with distinguished past authors including senior regulators, central bankers and even a Prime Minister. Financial crises, predatory practices, internationalization and integration, the increased use of technology and financial innovation are just some of the changes and issues that contemporary financial regulators are grappling with. These challenges and changes hold profound implications for regulation and compliance, ranging from macro-prudential to consumer protection policies. The journal seeks to illuminate these issues, is pluralistic in approach and invites scholarly papers using any appropriate methodology. Accordingly, the journal welcomes submissions from finance, law, economics and interdisciplinary perspectives. A broad spectrum of research styles, sources of information and topics (e.g. banking laws and regulations, stock market and cross border regulation, risk assessment and management, training and competence, competition law, case law, compliance and regulatory updates and guidelines) are appropriate. All submissions are double-blind refereed and judged on academic rigour, originality, quality of exposition and relevance to policy and practice. Once accepted, individual articles are typeset, proofed and published online as the Version of Record within an average of 32 days, so that articles can be downloaded and cited earlier.