How to test an insider trading law and its effectiveness: Price movements and comparative empirical data from Taiwan

Chien-Chung Lin and Huan-Ting Wu

International Review of Law and Economics, 2019, vol. 57, issue C, 22-36

Abstract: Successfully enforcing insider trading law, as well as determining the effectiveness of that enforcement, is one of the quandaries of securities law. The main reason for this perplexity is that there is no tally of how many illegal trading activities are actually taking place. To solve this problem, this study proposes to use pre-announcement price run-up as a proxy for measuring the effectiveness of an insider trading law. After examining mergers and acquisitions data from Taiwan’s Financial Supervisory Commission from 2003 to 2016 and adjusting for market effect, we arrive at an average cumulative abnormal return of 6.62% before the official announcement of the events. This constitutes a 58.9% run-up compared with the post-announcement price increase.

Keywords: Insider trading; Informed trading; Empirical data; CAR; Event study; Taiwan (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0144818818301856
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:57:y:2019:i:c:p:22-36

DOI: 10.1016/j.irle.2018.11.002

Access Statistics for this article

International Review of Law and Economics is currently edited by C. Ott, A. W. Katz and H-B. Schäfer

More articles in International Review of Law and Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().