The Harm from Insider Trading and Informed Speculation

Michael Manove

The Quarterly Journal of Economics, 1989, vol. 104, issue 4, 823-845

Abstract: Insider traders and other speculators with private information are able to appropriate some part of the returns to corporate investments made at the expense of other shareholders. As a result, insider trading tends to discourage corporate investment and reduce the efficiency of corporate behavior. In the context of a theoretical model, measures that provide some indication of the sources and extent of the investment reduction are derived.

Date: 1989
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