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Post by Sapphire Capital on Sept 24, 2020 2:58:58 GMT 4
Shadow Trading The Accounting Review, Forthcoming 64 Pages SSRN-id3689154.pdf (762.8 KB) 10 Sep 2020 Mihir N. Mehta University of Michigan at Ann Arbor David M. Reeb National University of Singapore Wanli Zhao Renmin University of China Date Written: September 6, 2020 Abstract We investigate whether corporate insiders attempt to circumvent insider trading restrictions by using their private information to facilitate trading in economically-linked firms, a phenomenon we call “shadow trading.” Using measures of informed trading to proxy for shadow trading, we find increased levels of informed trading among business partners and competitors before a firm releases private information. To rule out alternative explanations, we examine two shocks to insiders’ incentives to engage in shadow trading: high-profile regulatory enforcement against conventional insider trading and staggered changes to their outside employment opportunities. Finally, we document attenuated levels of informed trading among business partners and competitors when firms prohibit shadow trading. Overall, we provide evidence that shadow trading is an undocumented and widespread mechanism that insiders use to avoid regulatory scrutiny.
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Post by anenro on Sept 24, 2020 17:32:45 GMT 4
Insider trading is illegal because it carries an advantage over others (the outsiders). Next, they will outlaw people with Ph.D., in finance or economics because these people will hold higher education and understanding over people with only a high school diploma.
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