Edited by Enrico Colombatto
Chapter 16: Insider Trading, Takeovers and Property Rights
Pierre Garello Why should we deal with these two issues and what relates them? The ﬁrst common point is surely that both issues, insider trading and takeover, have attracted much attention, not only from the media but also from regulators and legislators, and consequently, from scholars. Today, insider trading and takeovers are among the most regulated property rights transactions. Moreover, those regulations have been and still are the object of many controversies. Another common point is that both issues are related to corporate governance. Insider trading, at least initially, describes a type of behaviour on the part of top employees that was judged to be detrimental to the owners of the company, that is, the shareholders; while the goal of a takeover is most of the time to change the management of a corporation, or at least to modify its strategy. Hence at the heart of both issues we ﬁnd the relationship uniting shareholders and managers, even though, as will be recalled below, the general functioning of the market is also a matter of concern for the regulator. A third common point relates to the problem of jurisdiction. In both cases the search for a solution to the problem could either be left to the parties directly involved in the contractual relationship (the contract between managers and owners, the contract between co-owners, or the contract between companies and trading centres), or entrusted to the local state; a third possibility, is that it could be left to the federal level (for...
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