Why Is Insider Trading Problematic

question 39

Multiple Choice

Why is insider trading problematic?

• A)If insiders trade on their information,they cause unnecessary share price fluctuations that drive away outside investors.
• B)If insiders trade on their information,the firm is automatically fined and there will be a net loss in firm value.
• C)If insiders trade on their information,outside investors will benefit from the increase in the share price and thus there is a free rider problem.
• D)If insiders trade on their information,it increases the conflicts between shareholders and managers.
• E)If insiders trade on their information,their profits come at the expense of outside investors,making outside investors less willing to invest in corporations.

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Definitions:

Empathy

The capacity to comprehend and empathize with someone else's emotions.

Stress Tolerance

The capacity to endure stress and react positively in challenging situations without becoming overwhelmed.

Adaptability Competency

The ability to be flexible and adjust to changing conditions or environments effectively.

Stress Tolerance

Capacity to withstand psychological and emotional stress without succumbing to adverse effects.