This paper, to begin with asymmetry information between CEO and investors, establishes a model in the general equilibrium framework considering CEO compensation, stock price and inside trading regulation. The model shows that if the inside trader is the CEO itself, there would be no equilibrium in the market, or else any regulation would not be efficient, unless CEO is offered extra compensation. This paper has proved the existence of CEO compensation which makes the market equilibrium. Simulated calculation of the model shows that combination of insider trading regulation and CEO compensation can improve market's efficiency. Considering the cost of regulation, the paper has figured out the quantitative form of optimal inside trading regulation.
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