Legalizing Insider Trading May Have Some Advantages If Managers of a Company

question 272

Multiple Choice

Legalizing insider trading may have some advantages if managers of a company could freely trade its stock. For instance, corporate accounting scandals would be detected sooner if:

• A) people from outside the firm had information about the accounting fraud before the managers would.
• B) managers had a strong incentive to report the fraud to the government rather than to trade the stock.
• C) speculation allowed the accounting fraud to continue for a longer period before being discovered.
• D) managers who knew the true performance of the company had an incentive to trade the stock, tipping the world off that something was afoot.

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Definitions:

Biological Imperative

A fundamental principle, characteristic, or instinct that drives living organisms to survive, reproduce, and evolve.

Reproduce

The biological process by which new individual organisms are generated, ensuring the continuation of their species.

Tanner

Pertains to the Tanner scale, a system that measures the physical development in children, adolescents, and adults based on external primary and secondary sex characteristics.

Growth Spurt

A rapid change in height and weight that signals the onset of puberty.