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:

Impression Management

The effort to control or influence the perceptions of others about a person, object, or event.

Machiavellianism

A personality trait centered around manipulativeness, callousness, and a strategic approach to interpersonal relationships, often with a lack of ethical consideration.

Organizational Settings

Refers to the work environment and conditions under which an organization operates, including its policies, procedures, and culture.

Power

The ability of an individual or group to influence outcomes, control resources, or direct the behavior of others.