Research Handbook on Insider Trading
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Research Handbook on Insider Trading

Edited by Stephen M. Bainbridge

In most capital markets, insider trading is the most common violation of securities law. It is also the most well known, inspiring countless movie plots and attracting scholars with a broad range of backgrounds and interests, from pure legal doctrine to empirical analysis to complex economic theory. This volume brings together original cutting-edge research in these and other areas written by leading experts in insider trading law and economics.
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Chapter 12: Has illegal insider trading become more rampant in the United States? Empirical evidence from takeovers

Laura Nyantung Beny and H. Nejat Seyhun


Insider trading has long sparked popular outrage about the perceived excesses of Wall Street and corporate insiders’ abuse of their privileged positions at the expense of ordinary investors (i.e., widows, orphans and the rest of us). This is especially true during economic recessions and capital market downturns, as in recent years. At such times, populist outrage over insider trading and other types of corporate fraud soars to peak levels. In turn, this places great pressure on regulators and prosecutors to pursue alleged inside traders with greater ferocity than in economically normal times. Indeed, in the last few years, US federal authorities have increased the ante, enforcing insider trading laws with renewed vigor. A prominent recent example is the Galleon case, the largest insider trading scandal in the USA in decades. This case ultimately resulted in 2011 in a criminal conviction and an 11-year prison sentence for Raj Rajaratnam, the man at the center of the scandal. The case involved widespread information networks and insider trading at several prominent hedge funds, including Galleon Management, LP, the former multi-billion dollar hedge fund founded and run by Mr. Rajaratnam.

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