Insider Trading and Innovation

Ross Levine (), Chen Lin and Lai Wei

No 21634, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper assesses whether legal systems that protect outside investors from corporate insiders increase or decrease the rate of technological innovation. Based on over 75,000 industry-country-year observations across 94 economies from 1976 to 2006, we find that enforcing insider trading laws spurs innovation—as measured by patent intensity, scope, impact, generality, and originality. Consistent with theories that insider trading slows innovation by impeding the valuation of innovative activities, the relationship between enforcing insider trading laws and innovation is much larger in industries that are naturally innovative and opaque, and equity issuances also rise much more in these industries after a country starts enforcing its insider trading laws.

JEL-codes: F63 F65 G14 G18 O3 O47 (search for similar items in EconPapers)
Date: 2015-10
New Economics Papers: this item is included in nep-ino and nep-tid
Note: CF DEV EFG IFM PR
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Citations: View citations in EconPapers (1)

Published as Ross Levine & Chen Lin & Lai Wei, 2017. "Insider Trading and Innovation," The Journal of Law and Economics, vol 60(4), pages 749-800.

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