earticle

영어

This paper discusses the insider trading sanctions in the 1980s in terms of their interrelationship with mergers and acquisitions (M&A) and budget restraint of the Securities and Exchange Commission (SEC). A party against insider trading, including the SEC, argues that insider trading erodes public confidence in capital market, and eventually raises firms’ cost of capital, pressing corporate efficiency down. In this case, active insider trading is detrimental not only to industrial productivity, but also to public interest in general. The other party sympathetic to insider trading maintains that insider trading is an inexpensive way of compensating insiders for their managerial and supervising efforts. If this argument is true, banning insider trading requires a better method to circumvent general principal-agent problem, aligning insiders’ interest with shareholders’ hope that insiders’ efforts are focused on corporate efficiency and productivity with higher share values. Insider trading sanctions, both case laws and statutory sanctions, were substantially reinforced in the 1980s. The SEC pursued insider trading not only because insider trading potential was larger due to the M&A boom, but also because they needed an easy-to-publicize issue to alleviate budgetary pressure on them.