Insider Trading and Its Implications for Corporate Governance and Market

Abstract

Corporate governance has been at the forefront of the policy agenda in developed market economies for the better part of a decade, and it is slowly but surely making its way to the top of the policy agenda in India. The most important stock exchanges in India are known as the NSE and the BSE. The Online Trading System, which has been operational in India for the past many years, is used for all trading activities. The primary purpose of this research was to investigate the impact that corporate governance has on insider trading, with the following sub-goals in mind as a framework for the investigation: to investigate the intricate relationship between insider trading, corporate governance, and market dynamics as a whole; to provide a thorough comprehension of its implications for corporate governance, market fairness, and investor confidence; to investigate the ethical, legal, and economic aspects of insider trading, casting light on its impact on various stakeholders, regulatory measures, and the role of corporate governance in preventing such practices. The researcher used a descriptive research design in their investigation. Trading on inside information has significant repercussions not only for the administration of corporations but also for the market as a whole. It calls into doubt the ethical standards that should be followed, it destroys trust, and it can disrupt the normal operation of financial markets. In order to solve these concerns, businesses need to place a primary emphasis on preserving a healthy ethical culture, rigorous governance standards, and efficient mechanisms to prevent and identify instances of insider trading. Additionally, regulators play an essential part in the enforcement of laws and regulations to preserve the integrity of the market and safeguard investor interests. According to the findings of the study, publicly traded corporations should adopt a corporate governance strategy known as strong corporate governance. This strategy has as its primary objective the elimination of illegal insider trading by isolating the firm's principals and agents from its management and board of directors.