{"title":"Capital-market effects of tipper-tippee insider trading law: Evidence from the Newman ruling","authors":"Andrew T. Pierce","doi":"10.1016/j.jacceco.2023.101639","DOIUrl":null,"url":null,"abstract":"<div><p>This study examines the capital-market effects of tipper-tippee insider trading laws. To do so, I exploit the unexpected decision issued by the Court of Appeals for the Second Circuit in U.S. v. Newman 773 F.3d 438, which reduced legal jeopardy for Second Circuit-based market participants prior to being overturned. Consistent with Newman constraining insider trading enforcement, I find strong evidence of plausible insider trading in the Second Circuit following the ruling. I also document a substantial reduction in general trading activity in Second Circuit stocks, as well as an increase in daily quoted spreads and the price impact of trading. These findings are consistent with unchecked insider trading increasing transaction costs and crowding-out investors. In total, my results show that tipper-tippee insider trading restrictions play an important role in bolstering market integrity, and that market participants can to some degree counteract insider trading when public regulation is constrained.</p></div>","PeriodicalId":48438,"journal":{"name":"Journal of Accounting & Economics","volume":"77 2","pages":"Article 101639"},"PeriodicalIF":5.4000,"publicationDate":"2024-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting & Economics","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0165410123000630","RegionNum":1,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This study examines the capital-market effects of tipper-tippee insider trading laws. To do so, I exploit the unexpected decision issued by the Court of Appeals for the Second Circuit in U.S. v. Newman 773 F.3d 438, which reduced legal jeopardy for Second Circuit-based market participants prior to being overturned. Consistent with Newman constraining insider trading enforcement, I find strong evidence of plausible insider trading in the Second Circuit following the ruling. I also document a substantial reduction in general trading activity in Second Circuit stocks, as well as an increase in daily quoted spreads and the price impact of trading. These findings are consistent with unchecked insider trading increasing transaction costs and crowding-out investors. In total, my results show that tipper-tippee insider trading restrictions play an important role in bolstering market integrity, and that market participants can to some degree counteract insider trading when public regulation is constrained.
本研究探讨了内幕交易法对资本市场的影响。为此，我利用了第二巡回上诉法院在 U.S. v. Newman 773 F.3d 438 一案中做出的出人意料的判决，该判决在被推翻之前减少了对第二巡回法院市场参与者的法律危害。与纽曼案对内幕交易执法的限制相一致，我发现在该案判决后，第二巡回法院存在大量可信的内幕交易证据。我还记录了第二巡回法院股票一般交易活动的大幅减少，以及每日报价价差和交易价格影响的增加。这些发现表明，不受约束的内幕交易会增加交易成本，挤出投资者。总之，我的研究结果表明，对 "自提者-被提者 "的内幕交易限制在加强市场诚信方面发挥了重要作用，而且当公共监管受到限制时，市场参与者可以在一定程度上抵制内幕交易。
期刊介绍：
The Journal of Accounting and Economics encourages the application of economic theory to the explanation of accounting phenomena. It provides a forum for the publication of the highest quality manuscripts which employ economic analyses of accounting problems. A wide range of methodologies and topics are encouraged and covered: * The role of accounting within the firm; * The information content and role of accounting numbers in capital markets; * The role of accounting in financial contracts and in monitoring agency relationships; * The determination of accounting standards; * Government regulation of corporate disclosure and/or the Accounting profession; * The theory of the accounting firm.
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