What exactly is wrong with insider trading? Is it unfair? Is it inefficient? Does it undermine the public's confidence in the securities markets or distort the incentives of corporate managers to maximixe the value of shares? A variety of different rationales have been offered to explain the prohibition of trading by those in possession of material, inside information about the price of a publicly traded corporation's securities.

In fact, insider trading cannot be labeled either unfair or inefficient unless it harms investors. Nor does insider trading undermine investor confidence in the securities markets if such trading maximizes the value of a firm. The author points out that in countries like Japan, where insider trading is rampant, the public has enormous confidence in the stock market. Finally, to the extent that insider trading is an efficient mechanism for compensating managers, it does not distort their incentives to maximize the value of a firm.

Jonathan R. Macey provides a special analysis of insider trading. The book presents different perspectives that explain the prohibition of insider trading and the way it affects various aspects of life on the stock market. In particular, this book analyzes insider trading as a whole from an economic and political view.

Jonathan R. Macey is a professor of law at the University of Chicago.