Among the reactions to recent corporate scandals are calls for greater transparency of insiders' trades. The Securities and Exchange Commission's recent rule on fair disclosure is accompanied by a safe harbor from prosecution under insider trading laws for insiders who pre-commit to trades. A...

Research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers. Within an agency framework, we model endogenous social norms by assuming each agent's cost of implementing an action depends on the social norm for that action, defined to be...

Evidence contrasting U.S. insider trades in high- and low-jeopardy periods and across firms at high and low risk for 10b-5 litigation indicates that insiders condition their trades on foreknowledge of price-relevant public disclosures, but avoid profitable trades when the jeopardy associated...

We investigate the relationship between insider trading and candidate measures for the degree of information asymmetry between insiders and other market participants. The coefficient estimates on certain of the candidate measures assume a sign that is inconsistent with the predicted relationship...

This paper provides evidence that insiders possess, and trade upon, knowledge of specific and economically-significant forthcoming accounting disclosures as long as two years prior to the disclosure. Stock sales by insiders increase three to nine quarters prior to a break in a string of...

Regulation requiring insiders to publicly disclose their stock trades after the fact complicates the trading decisions of informed, rent-seeking insiders. Given this requirement, we present an insider's equilibrium trading strategy in a multiperiod rational expectations framework. Relative to...

This paper analyzes tax planning opportunities when tax rates change for issuers and holders of employee stock options. Then the paper examines the response of a sample of optionees to proposed changes in the tax law alleged to have precipitated the exercise of many employee stock options in the...

In large part, the form of investment advisers' compensation contracts is imposed by the Securities and Exchange Commission. Given these contractual forms, this paper considers the portfolio choices that emerge when advisers rationally cultivate their reputations. In a two-period model of...

This paper examines a two-period model of investment management. Investors reallocate their wealth between two mutual funds managed by different investment advisers after observing the performance of each adviser in the first period. A reputation effect causes one adviser to use his private...

This paper examines the valuation of employee stock options (ESOs). Because ESOs are inalienable, the employee's optimal exercise policy differs from the policy a naive reading of the finance literature would suggest. The employee prefers to exercise options before maturity under certain...