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http://dx.doi.org/10.1016/0165-4101(94)00377-H

has been cited by the following article:

• TITLE: Does Inside Trading Affect Managers’ Decision-Making? A Theoretical Investigation

  AUTHORS: Ning Cao, Shanmin Li, Yong Li

  KEYWORDS: Insider Trading, Risk Aversion, Agency Problem

  JOURNAL NAME: Journal of Mathematical Finance, Vol.5 No.4, November 17, 2015

  ABSTRACT: This paper analyzes how inside trading affects managers’ decision-making and also examines the effect of the social relations on managers. Through model analysis, the paper shows that inside trading does affect managers’ behavior. Inside trading lowers the managers’ minimum requirements for risky projects and thus has a risk-reduction effect on managers. In some cases, the existence of inside trading makes managers select projects with negative returns, which results in agency problems. When managers try to consolidate their social networks by divulging inside information, agency problems are exacerbated. This paper also analyzes the degree of risk aversion. As the degree of a manager’s risk aversion increases, the risk-reduction effect of inside trading is reduced.