Question

An insider trading case study is about someone who has knowledge of an impending merger between two companies. The combination of the two firms will certainly change the market dynamics of the industry and owners of stock in either company will greatly benefit, once the news of the merger is publicly announced. How can it be analyzed in regard to the legal, ethical, and economic-social implications???

Answer 1

The insider trading of the stock by the existing stockholders and who have the knowledge of the price amplifying news regards the combination of the two firms which will change the market dynamics of the industry can be analysed as:

LEGALLY : The owner are restricted to trade in their stocks for a period of time of the merger of the firms. This will restrict the insider trading.

ETHICALLY: The doing of insider trading by the owner is not wrong because they have kept the stock with them for years and this activity will provide them value of their efforts.

ECONOMIC-SOCIAL IMPLICATIONS: On the point of economic and social effect, the insider trading is not good because provides the owners and the large stockholders a monopoly stand to have undesired benefits of the combination of two firms and their strength.

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