Business ethical issues with insider trading

Business ethical issues with insider trading - Business...

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Business ethical issues with insider trading. From a business perspective, there are still ethical issues with insider trading. Businesses exist to make money. It's a fact that a capital market accepts and is a cornerstone of American culture. But a few making money at the expense of the many raises not only moral ethical issues, but also business issues. When investors don't have the money to invest, or they don't have confidence in the market, they don't invest. Undermining that confidence can have severe financial repercussions, as well as affecting the market as a whole; in which case the advantage of a few comes at the cost of many-a cost that can continue for years. Insider trading has a bad reputation and it is generally assumed that it should be banned. Nevertheless, the ethical and economic question whether insider trading is harmful or not is still an active. In this discussion economists often resort to ethics as the ultimate argument for a prohibition of insider trading, but rarely get far beyond simple exclamations as “it’s just not right” or “it’s unfair”. On the other hand the ethical analysis of the problem offered in Ma and Sun (1998) is sometimes hampered by a lack of empirical knowledge about the impact of insider trading and postulates all kinds of effects, e.g. a negative impact on investor confidence, for which the indications are lacking. Duty of trust or confidentiality. Insider trading also violates the duty of trust or confidentiality that one individual or business entity owes to another. In a duty of trust argument, the person or entity that has access to proprietary information owes a duty of trust not to use that information against the people who don't possess it. In a
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This note was uploaded on 07/28/2011 for the course GM 591 taught by Professor Jimlot during the Spring '09 term at Keller Graduate School of Management.

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Business ethical issues with insider trading - Business...

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