Abstract
We assess whether restrictions on insider trading accelerate or slow technological innovation. Using over 80,000 industry-country-year observations across 74 economies from 1976 to 2006, we find that enforcing insider-trading laws spurs innovation—as measured by patent intensity, scope, impact, generality, and originality. Furthermore, the evidence is consistent with the view that restricting insider trading accelerates innovation by improving the valuation of, and increasing the flow of equity financing to, innovative activities.
| Original language | English |
|---|---|
| Pages (from-to) | 749-800 |
| Number of pages | 52 |
| Journal | Journal of Law and Economics |
| Volume | 60 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - Nov 2017 |
Bibliographical note
For helpful comments and suggestions, we thank Dennis Carlton and the anonymous referee. We are also grateful to Sumit Agarwal, Utpal Bhattacharya, Lee Fleming, Huasheng Gao, Stephen Haber, Wes Hartmann, Harald Hau, Po-Hsuan Hsu, Kai Li, Gustavo Manso, Jay Ritter, Yona Rubinstein, Farzad Saidi, Krishnamurthy Subramanian, Xuan Tian, Xu Yan, and Bohui Zhang and seminar participants at the Entrepreneurial Finance and Innovation around the World Conference in Beijing; the International Conference on Innovations and Global Economy held by the Alibaba Group Research Centre at Zhejiang University; the Geneva Graduate Institute of International and Development Studies; the American Financial Association annual meetings; the Hoover Institution’s Working Group on Innovation, Intellectual Property, and Prosperity conference at Stanford University; the Edinburgh Conference on Legal Institutions and Finance; the University of California, Berkeley; and the University of Florida.Funding
We thank the Clausen Center for International Business and Policy for financial support.