348. Laura Nyantung Beny, The Political Economy of Insider Trading Legislation and Enforcement International Evidence, 01/2002.
Abstract: In this paper, I present a political economy analysis of insider trading laws and enforcement. I argue that there is greater (private and public) support for enacting insider trading legislation and enforcing such legislation (once it is in place) in countries where the confluence of legal, financial, political and institutional factors fosters and maintains the development of an "outsider" financial system. Conversely, I argue that there is less (public and private) support for insider trading legislation and enforcement in countries where these factors facilitate an "insider" financial system. I also argue that insider trading regulation might be consistent with social welfare, contrary to the public choice theory of insider trading regulation espoused by Haddock and Macey (1987). From these propositions, I derive several testable hypotheses about the relative timing of enactment and enforcement of insider trading rules among countries. I then test these hypotheses using time series data from the largest possible cross section of countries, employing a regression technique referred to as duration analysis. The paper's findings generally support the prediction that "outsider" systems tend to enact and/or enforce insider trading laws relatively earlier than "insider" systems, controlling for the age and the level of development of the stock market.