| | INTRODUCTION OF INSIDER TRADING: Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company. In various countries insider trading based on inside information is illegal. This is because it is seen as being unfair to other investors who don't have access to the information. The authors of one study claim that illegal insider trading raises the cost of capital for securities issuers, thus decreasing overall economic growth.] However, some economists have argued that insider trading should be allowed and could, in fact, benefit markets.
Abstract Insider trading is defined as "insiders trading on shares of a company for which they have privileged 'material' information not available to the 'public', and for which they seek to gain pecuniary or other benefits" . Past literature has provided numerous studies discussing the application of ethics to insider trading and to what extend one can consider such a practise as moral or immoral. Engelen and Liedekerke make a clear distinction between insider trading and market manipulation that they define as where private information is used in order to make a share value shift from its fundamental value and therefore implies market inefficiency. Under their definition insider trading, on the other hand, can hardly be qualified as immoral and increase market efficiency. The discussion about insider trading therefore leads to the much wider issue of morality Vs legality.
1. Why did accounting fraud occur at WorldCom? There were a number of reasons that led to the occurrence of accounting fraud at WorldCom but the main reason was to boost up the price of the WorldCom stock amid a slowdown in the telecommunications industry. As Bernard J. Ebbers, Chief Executive Officer, declared in 1997, “Our goal is not to capture market share or be global. Our goal is to be the No.
1. What form of partnership allows some of the investors to limit their liability? Explain by giving examples. There are many ways people start their businesses; the first one being sole proprietorship, second one partnership, and the last one corporation. Sole proprietorship refers to one owner, partnership refers to two or more owners, and corporation is a unique ownership that can be purchased through stocks.
e. Although its stockholders are insulated by limited legal liability, the corporation's legal status does not protect the firm's managers in the same way; i.e., bondholders can sue its managers if the firm defaults on its debt, even if the default is the result of poor economic conditions. 3. Which of the following statements is CORRECT? a. In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
Answer: T 1-4 If a household invests in corporate securities and does not supervise how the funds are invested or used by the corporation, the risk of not earning the desired return or not having the funds returned increase. Answer: T 1-5 If not done by FIs, the process of monitoring the actions of borrowers would reduce the attractiveness and increase the risk of investing in corporate debt and equity by individuals. Answer: T 1-6 Failure to monitor the actions of firms in a timely and complete fashion after purchasing securities in that firm exposes the investor to agency costs. Answer: T 1-7 The risk that the sale price of an asset will be less than the purchase price of an asset is called liquidity risk. Answer: F 1-8 Because bank loans have a shorter maturity than most debt contracts, FIs typically exercise less monitoring power and control over the borrower.
Is this a self-dealing transaction? If Pickens gets access to financial information, how can he set out to prove his accusations? If you were an investment banker, what accounts or data would you tell him to scrutinize. Would you suggest to change the charter of the organization of Koito? How?
In some cases executives would misuse company funds for personal use, such as vacations on company credit cards of use of company planes for private adventures. In 2002 SOX was enacted to make accounting practices in U.S. publicly traded companies more accurate and help investors regain confidence in where they were investing their money. This act imposes heavy penalties for unethical behaviors and reporting and holds upper management and executives responsible for those accounting practices and financial reporting. A study was performed to evaluate how the financial reporting behavior of companies was affected by the enactment of SOX. This study evaluated two Canadian companies’, one of which was impacted by SOX and the other was not, financial records both prior to and post SOX enactment (Lobo & Jian 2010).
b. If you needed to get funding for your company, would you prefer to get debt funding or equity funding? Explain why you would prefer this type. (2-4 sentences. 2.0 points) I would choose to get debt funding to open my business.
Did congress overstep its bounds in the wake of the terrorist attacks of 2001? Is this exception of enough value to tread in this grey area, is the political choice. 4. What is the responsibility of a business such as AT&T or Verizon in this matter? What are the ethical, social, and political issues raised by a business such as a phone company working with the