Insider trading and the short-swing profit rule

• 成果类型: Article
• 署名作者: Lenkey, Stephen L.
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2017.03.004
• 发表日期: 2017
• 页码: 517-545
• 关键词: Asymmetric information; Insider trading; Financial regulation

摘要

The short-swing profit rule is a federal statute that requires insiders to forfeit any trading profit earned from a combined purchase and sale that occurs within a six-month period. Using a multi-period strategic rational expectations equilibrium framework, I demonstrate that the rule tends to reduce both the amount of insider trading and the amount of profit earned by an informed insider from information-based trades because the rule imposes a constraint on the insider's dynamic trading strategy. Nevertheless, the rule increases the insider's welfare at the expense of uninformed investors (outsiders) because the rule inhibits risk sharing, which leads to an ex ante wealth transfer from outsiders to the insider. (C) 2017 Elsevier Inc. All rights reserved.