Insider Trading, Informed Trading, and Market Mechanisms: A Comparative Perspective from Taiwan
It is the unsolvable paradox of human nature that makes the research of insider trading law wonderfully but strangely attractive. Although nowadays most countries in the world have an insider trading law, hundreds of thousands of scholars still invest their time and efforts in debating whether the acts of insider trading should be banned, and to what scope should the acts be illegalized. In this dissertation, I will lead the readers to a journey of exploring insider trading law. Particularly, the three main chapters of this dissertation are respectively composed by three related but independent papers on different aspects surrounding the insider trading law of the US and Taiwan. In Chapter 2, I am going to examine the recent development of the US insider trading law imposed on market professionals, from the perspective of both law and financial economics. We are going to see how the US courts assess the dual roles of market professionals —— enhancing the price efficiency of stock prices while exploiting the other investors —— and balance the contribution and harm market professionals bring to the market, when they are drawing the line between the illegal insider trading and lawful informed trading. Chapter 3 of this dissertation moves to examine the insider trading law of my home country Taiwan. In this chapter, the methodology of comparative studies will provide the readers with different lenses through which they can compare the philosophy of a civil law country when dealing with the problem of insider trading. Chapter 4 investigates and develops an empirical methodology that allows a government to test whether its insider trading enforcement is successful compared to other jurisdictions. Specifically, it uses the “pre-announcement price run-up” before the good news arrives at the market as the proxy for measuring the effectiveness of an insider trading law. Chapter 5 concludes.