Insider Dealing and Corporate Governance: Understanding the Role of Directors

Abstract

The separation of ownership and management of the company implicates the agency problem of insider dealing. And the practice of insider dealing has made it a target of judicial and statutory regulation due to its perceived breach of legal, equitable and ethical standards of conduct by self-interested company directors. However, the mandatory and penal force of statutory regulations has not successfully curbed the practice across various jurisdictions such as the US, the UK, and Nigeria. In this article, we probe the role of directors at the intersection between insider dealing and corporate governance. We determine how corporate governance processes may be implemented to prevent information asymmetry which breeds insider dealing. Our conclusion is instructive towards understanding the difficulty which arises from the incongruous role of directors who are potentially disposed to indulge in insider dealing while at the same time, have the responsibility to implement corporate governance processes relating to the prevention of insider dealing within the company.

Keywords: Insider dealing, corporate governance, information asymmetry, agency problem, company securities, corporate managers, company regulation

DOI: 10.7176/PPAR/12-2-03

Publication date:March 31^st 2022