When No Law is Better than a Good Law

Utpal Bhattacharya () and Hazem Daouk

No 51184, Working Papers from Cornell University, Department of Applied Economics and Management

Abstract: This paper argues, both theoretically and empirically, that sometimes no securities law may be better than a good securities law that is not enforced. The first part of the paper formalizes the sufficient conditions under which this happens for any law. The second part of the paper shows that a specific securities law - the law prohibiting insider trading - may satisfy these conditions. The third part of the paper takes this prediction to the data. We find that the cost of equity actually rises when some countries enact an insider trading law, but do not enforce it.

Keywords: International; Development (search for similar items in EconPapers)
Pages: 66
Date: 2009-06-16
New Economics Papers: this item is included in nep-cfn, nep-law and nep-reg
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Citations: View citations in EconPapers (40)

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Related works:
Journal Article: When No Law is Better Than a Good Law (2009)
Working Paper: When No Law is Better than a Good Law (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:cudawp:51184

DOI: 10.22004/ag.econ.51184

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