Career
He is the Peter J. & Stephanie J. Nolan Associate Professor in the Charles H. Dyson School of Applied Economics and Management at Cornell University. His articles have been cited over 2000 times (Google Scholar). In 1998, his research uncovered the rampant insider trading on the Mexican Stock Exchange.
This led to many questions about the value and the enforceability of insider trading laws.
In later research, Daouk conducted a comprehensive survey of insider trading laws and prosecution in about a hundred countries that have a stock market. He then showed that countries that enforce insider trading laws reduce the cost of financing of companies by many percentage points.
This is because outside investors no longer require to be compensated for the money they lose from trading with better-informed insiders. On the other hand, having the law without enforcing it, does not do anything.
This research was nominated for the Smith Breeden Prize for Best Paper in the Journal of Finance for the year 2002.
A little before the Enron scandal, Daouk was investigating whether informational risk associated with accounting earnings quality impacts stock markets around the world (he analyzed financial statements from 34 countries for the period 1985-1998). He found that accounting manipulation in a country, increases significantly the cost of financing of companies and reduces liquidity. Daouk is also known for his research that documents short selling laws and practice in about a hundred stock markets in the world.
He shows that when short selling is possible, stock prices are less volatile and there is greater liquidity.
However, he does not oppose the temporary restrictions on short selling that were enacted in different countries in reaction to the financial crisis.
