Across the globe, many view insider trading as a threat to stock market integrity and efficiency. This is evidenced by the fact that, as of 2000, eighty-seven countries had enacted insider trading legislation and thirty-eight had prosecuted insider trading at least once. However, these laws vary in stringency and many of them were enacted only recently. Enforcement intensity also varies across countries, with some countries regularly enforcing insider trading laws and others allowing insiders to trade with impunity notwithstanding the laws on the books. The aim of this study, The Political Economy of Insider Trading Law and Enforcement: Law vs. Politics? International Evidence, is to provide a greater understanding of the political and economic determinants of the differential timing of insider trading legislation and enforcement across countries.

Those who oppose insider trading regulation often rely on the private interest theory of regulation to explain how these laws, despite their presumed inefficiency, are enacted to satisfy influential private interests. In contrast, those who support insider trading restrictions rely on the public interest theory of regulation to explain how insider trading regulation is enacted to address market failures. The two theories are rarely merged into a single framework. However, because insider trading and its regulation concern the distribution of property rights to use private corporate information, the issue has both private (distributional) and public (efficiency) dimensions. I take both dimensions into account in this study.

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