Insider Trading, Informativeness, and Price Efficiency Around the World

This paper provides the first direct evidence of the impact of enforcing insider regulations on the informativeness of insider trades and stock price efficiency across 44 countries with varying levels of insider trading regulations. Results suggest that insider purchases earn abnormal profits, especially in countries with active enforcement of insider trading regulations. We further show that while insiders trade less before earnings announcements in countries with active enforcement, their stock prices react more to earnings news than those in countries without active enforcement. Overall, our results support the view that effective insider trading regulation promotes price efficiency