Insiders and the Law: The Impact of Regulatory Change on Insider Trading

摘要

1. Despite the importance of insider trading laws in promoting a strong financial market, the impact of regulations in minimizing the detrimental effects of insider trading is unsettled.rn2. We add to the literature by examining the impact of the introduction of the Securities Market Amendment Act 2002 in New Zealand on several aspects of the market, namely bid-ask spreads, liquidity, price volatility and the cost of capital.rn3. We find strong evidence of predicted reductions in the cost of capital, bid-ask spreads and volatility accompanied by increases in liquidity. We conclude that the change in regulations has had a positive impact on the market.