Tuesday, September 15, 2020

What Do People Really Think of Insider Trading? Part III

This is the third installment of a multi-part guest blog presenting some of the results of the first comprehensive, large-scale, national survey of public attitudes regarding insider trading. My co-authors (Jeremy Kidd and George Mocsary) and I present the survey’s complete results in our forthcoming article, Public Perceptions of Insider Trading. This installment focuses on the public’s views concerning the morality of insider trading.

The survey asked participants (1) whether they would trade on inside information if it came into their possession; (2) whether they believe that insider trading is morally wrong; and (3) whether they believe that insider trading should be illegal. The following table offers a demographic breakdown of the results.

 

Would you trade based on inside info?

Is insider trading morally wrong?

Should insider trading be illegal?

 

Yes

No

Yes

No

Yes

No

Overall

44.9%

55.1%

62.8%

35.5%

66.7%

33.3%

Gender

Female

45.9%

54.1%

59.4%

39.3%

62.5%

37.5%

Male

43.6%

56.4%

66.7%

31.2%

71.5%

28.5%

Race

Asian

56.1%

43.9%

56.1%

42.4%

62.1%

37.9%

Black

59.0%

41.0%

43.3%

55.1%

45.5%

54.5%

Latinx

61.5%

38.6%

45.8%

51.8%

48.2%

51.8%

Native Am.

66.7%

33.3%

58.3%

41.7%

58.3%

41.7%

White

39.7%

60.2%

68.6%

29.7%

72.6%

27.4%

Other

40.9%

59.1%

59.1%

40.9%

72.7%

27.3%

Trading Status

Invest

51.3%

48.7%

66.5%

31.6%

71.3%

28.7%

Abstain

40.3%

59.7%

59.3%

39.3%

62.4%

37.6%

As expected, a majority of respondents (63%) view insider trading as immoral and 66% think it should be illegal. These numbers are relatively close—at the margin of error for the poll. But the story is more complex when considered in light of responses concerning trading preferences. 18% of respondents said insider trading is immoral but also said they would trade on it—reflecting some cognitive dissonance or a lack of moral clarity. 10% said insider trading is not immoral but also said they would not trade on it--call them cautious abstainers.

We attempted to use these figures to get a clearer sense of respondents’ “true” moral attitudes regarding insider trading. If we take the number who said it is immoral and subtract out those who’s moral clarity is weak, we get 44.2% who have a clear sense that insider trading is wrong. If we take those who would not trade on inside information and subtract those who abstain only out of caution (e.g., fear of prosecution), we get 44.6% who abstain on moral grounds. It is interesting that these two numbers are so close, and this consistency tracks across most demographic subgroups. The numbers suggest that there is a core group of respondents (~44%) who have moral clarity that insider trading is wrong, and who would not trade on inside information for that reason.

The data therefore offers some evidence that the “true” percentage of respondents who believe that insider trading is immoral is probably less than 62%, and could be as low as 44%. See here for a more complete discussion of these and other findings from our survey.

The next installment of this post will share survey responses to a number of scenario-based questions.

https://lawprofessors.typepad.com/business_law/2020/09/what-do-people-really-think-of-insider-trading-part-iii.html

Securities Regulation, White Collar Crime | Permalink

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