The Regulation of Insider Trading as an Agency Problem

This paper attempts to shed a new light on the insider trading issue by studying the unintended effects of insider trading laws. It shows that government regulation of insider trading can actually make the problems it intends to resolve worse. More particularly, this paper shows that insider trading laws instead of mitigating the agency problems that have been associated with insider trading actually can aggravate them by hindering the effectiveness of governance mechanisms existing within and outside the corporation