search query: @indexterm Insider trading / total: 155
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| Author: | Hu, J. Noe, T. H. |
| Title: | Insider trading and managerial incentives |
| Journal: | Journal of Banking and Finance
2001 : APR, VOL. 25:4, p. 681-716 |
| Index terms: | AGENCIES INSIDER TRADING REGULATIONS MARKET EFFICIENCY |
| Language: | eng |
| Abstract: | The authors derive conditions under which permitting manager "insiders" to trade on personal account increases the equilibrium level of output and the welfare of shareholders. These increases are produced by two effects of insider trading. First, insider trading impounds information about hidden managerial actions into asset prices. This impounding of information allows shareholders to make better personal portfolio-allocation decisions. Second, allowing insider trading can induce managers to increase, on average, the correlation between their personal wealth and firm value beyond the level dictated by the employment relationship alone. This increased correlation increases managerial incentives. |
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