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'Investor Protection and Corporate Governance' analyzes the impact of corporate governance on firm performance and valuation. Using unique datasets gathered at the firm-level—the first such data in the region—and results from a homogeneous corporate governance questionnaire, the book examines corporate governance characteristics, ownership structures, dividend policies, and performance measures. The book's analysis reveals the very high levels of ownership and voting rights concentrations and monolithic governance structures in the largest samples of Latin American companies up to now, and new data emphasize the importance of specific characteristics of the investor protection regimes in several Latin American countries. By and large, those firms with better governance measures across several dimensions are granted higher valuations and thus lower cost of capital. This title will be useful to researchers, policy makers, government officials, and other professionals involved in corporate governance, economic policy, and business finance, law, and management.

Purpose The purpose of this paper is to uncover the essence of insider trading, explain why insider trading law is ineffective and provide implications of the effectiveness of the law. Design/methodology/approach This conceptual paper offers three propositions. The first two are based on a literature review of 62 articles in empirical research to develop an understanding of the essence of insider trading and identify the areas in which insider trading is ineffective. This analysis is used in the third proposition to provide a direction in suggesting effective measures to improve insider trading law. Findings The essence of insider trading is that corporate insiders exercise informational monopoly power over their trades. This understanding explains why insider trading law is ineffective because it has not taken away the monopoly power that corporate insiders possess and exercise. This understanding also leads to three antitrust suggestions aimed at improving insider trading law. Practical implications The findings may provide assistance to the lawmakers and regulators to make insider trading law more effective and enforcement more simplified. Originality/value This paper is of value to other researchers attempting to understand the essence of insider trading and to policymakers concerned about the existence of monopolistic behavior in the equity market and income inequality due to corporate insiders’ trading profit.

The last three decades have seen the issue of corporate insider trading come to the fore. With the emergence of corporate governance as a central concern to regulators and academics, the trading activity of corporate insiders neatly spans both governance and corporate finance policy areas. This review article synthesises the main ideas and the most important empirical research in corporate insider trading. Since regulation is the main backdrop to insider trading, the current law facing European corporations is also discussed. Finally, the review concludes by providing an insight into the future direction of research in corporate insider trading.

Corporate insiders may trade shares in their companies by utilizing their information advantage, such as access to manipulated earnings information. Once announced publicly by a credible disseminator with a large investor audience, this information advantage is attached to publicity and credibility. Subsequently, an information monopoly is formed. Trading strategies utilizing the publicized information advantage are therefore an exercise of monopolistic power. This type of trading by corporate insiders damages the fairness and integrity of the secondary market, and negatively impacts investor protection, market stability, and even crisis prevention. The existing insider trading regulations in the United States and many other nations are powerful, but their effectiveness is low when being enforced. This chapter proposes to add four new measures based on the financial reality that will provide securities regulators with controllable tools to implement. These tools pose a daily limit on trading volumes and share withholding percentage on corporate insiders. In addition, if the company's stock displays abnormal price behavior prior to the information release date, regulators have the right to postpone and investigate if there was any information leak in advance of public release. It is proposed that the CEO bear responsibility for such an event. These measures are quantifiable, are relatively easy to implement, and can be adjusted according to the regulatory priorities and local realities affecting securities regulators.

We examine whether investors’ tax-sensitivity affects dividend payout policy, and examine how the relations vary with institutions’ monitoring ability and with insider ownership. Taxable investors prefer receiving dividends before tax increases (i.e., dividend acceleration), but tax-insensitive investors do not. Consistent with this, we find that the likelihood and magnitude of dividend acceleration is lower for firms with high tax-insensitive institutional ownership. We then re-examine the positive relation between taxable insider ownership and dividend acceleration (Hanlon and Hoopes 2014). We find that dividend acceleration generally increases with insider ownership even when tax-insensitive institutional ownership is high, indicating that managers’ preferences outweigh institutions’ preferences. However, we find that tax-insensitive dedicated institutions constrain insiders’ ability to accelerate dividends, indicating that these institutions play a part in monitoring potentially excessive tax-motivated dividend payments. These results differ from several recent studies and provide important new insight in the relation between shareholder-level taxes and payout policy.

The chapter explains how beneficial ownership filings (Schedules 13D and 13G), corporate insider filings (Forms 3, 4, and 5), and traditional 13F filings can be used to unveil opportunities to initiate positions at or below the price range the corresponding manager traded at. A method to develop a manager‐bias spreadsheet based on 13F filings and information on the price range the manager traded at is described. The strategy of using the bias spreadsheet and beneficial ownership/corporate insider filings information to build positions is discussed. Back‐tested performance results from applying the strategy are presented.

This paper investigates systematic changes in corporate effective tax rates over the past twenty-five years. We find that effective tax rates have decreased significantly. Contrary to conventional wisdom, we find that the decline in effective tax rates is not concentrated in multinational firms; effective tax rates have declined at approximately the same rate for both multinational and domestic firms. Moreover, we find that within multinational firms, both foreign and domestic effective rates have decreased. Finally, we find that changes in firm characteristics and declining foreign statutory tax rates explain little of the overall decrease in effective rates. The findings have broad implications for tax research, as well as for current policy debates about reforming the corporate income tax.

Theory suggests that inside debt held by executives in the form of deferred compensation and unfunded pensions mitigates agency problems within the firm by altering the risk preferences of managers. We investigate whether the inside debt of the chief executive officer (CEO) or chief financial officer (CFO) is associated with reduced corporate tax avoidance. We measure tax avoidance using effective tax rates and a measure of discretionary tax avoidance for a large sample of public companies dating from 2006. Consistent with the conjecture that inside debt mitigates risky behavior for executives with a high level of financial sophistication, we find that the level of inside debt for the CFO, but not CEO, is associated with reduced tax avoidance. Our results are robust to numerous supplemental tests, including instrumental variables estimation and propensity score matching. Further subsample tests reveal this relation is stronger for firms with greater default likelihood. Overall, our results suggest that inside debt held by the CFO mitigates tax avoidance.