Analyzing Insider Trading from the Perspectives of Utilitarian Ethics and Rights Theory

Abstract

insider trading, ethics, utilitarian, rights theory, level playing field, asymmetric information, fiduciary duty,

Ethical Orientation and Personal Benefit in Insider Trading

“…The ethics of insider trading can be viewed from various aspects or principles, especially from utilitarian and rights principles (McGee, 2009). Based on the utilitarian, an act considered as ethical if an action will give more benefits by considering gain and loss.…”

“…McGee (2009) states that insider trading is fair if the gains to be obtained are greater than losses. He also stated that insider trading is a form of compensation so a company can give low compensation to employees.…”

New Directions in Legal Scholarship: Implications for Business Ethics Research, Theory, and Practice

“…For example, the fairness of insider trading is an important issue for business ethicists to discuss, but the increasing numbers of empirical studies that demonstrate insider trading's adverse impact upon the capital markets and economic development make important contributions to the debate as well (e.g., Bhattacharya and Daouk, 2002;Piotroski & Roulstone, 2004). Business ethics articles addressing this issue (e.g., Mcgee, 2009), cannot safely disregard empirical articles on the topic contained in law reviews. For example, Laura Beny found that countries with tougher insider trading laws and enforcement tended to have broader equity ownership, more accurate stock prices, and more stock market liquidity (Beny, 2007).…”

Differences in Ethical Perceptions of Insider Trading

“…On the other side, the arguments in favor of insider trading are typically of an economic nature and based on an improvement in market efficiency (Luberti 1984;McGee 2009). This view suggests that insiders' trades should move a stock's price toward its true fundamental value that reflects all available material information at a point in time.…”