Becker Meets Kyle: Legal Risk and Insider Trading

UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance

Emiliano Pagnotta

Topic: Becker Meets Kyle: Legal Risk and Insider Trading

Speaker: Emiliano Pagnotta, Imperial College London

Abstract: Do illegal insiders internalize legal risk? We address this question with hand-collected data from 530 SEC investigations. Using two plausibly exogenous shocks to expected penalties, we show that insiders trade less aggressively and earlier and concentrate on tips of greater value when facing higher risk. The results match the predictions of a model where an insider internalizes the impact of trades on prices and the likelihood of prosecution and anticipates penalties in proportion to trade profits. Our findings lend support to the effectiveness of U.S. regulations’ deterrence and the long-standing hypothesis that insider trading enforcement can hamper price informativeness.

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Moderator: Vinay Patel, University of Technology Sydney

Date: Wednesday, 16th June 2021
Time: 5-6 pm (Australian Eastern Standard Time)
Venue: This is on online Zoom webinar.

Seminar protocols:

  • The webinar will run for 45 minutes, followed by a 15 minute Q&A session.
  • There will be a moderator for each seminar event, who will facilitate communication and resolve any technical issues.
  • Participants can use the chat facility or raise their had to ask questions during the presentation. The moderator will then alert the speaker at the appropriate time and either ask the questions raised or unmute the participant so they can ask the question directly to the presenter.

Co-ordinator: Harry Scheule

Enquiries: Duncan Ford

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