This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
Another common method of exploitation is through the misuse by officers or directors of information which comes to them on the "inside" but which is unknown to other stockholders and perhaps unknown to all other officers and directors of the corporation. This is most likely to occur in connection with speculation, either in the company's own shares or in products the price of which can be affected by the corporation's activities.
As to the misuse of inside information for the purpose of speculating in the shares of their own company, innumerable instances might be given. The results are quite likely to be unfortunate for the officers, themselves, due partly to the fact that the information upon which they act is, in many cases, fragmentary, and due also to the fact, which many people fail to realize, that the up and down movements of stock market prices are determined only in part by the intrinsic merits of the securities. Fluctuations arise more largely from general economic and market influences, with which the officers of most industrial corporations are not especially familiar.