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This paper examines the hypothesis that major episodes of insider trading and business fraud promote accounting reforms. Dur-ing the 1860s and 1870s, the markets for Comstock mining shares reeled from one scandal after another. Eventually these scandals emerged as a leading political issue in California. The frauds contributed significantly to the passage of accounting and financial reporting reforms in 1880. The Comstock episode has implications for modern day instances of insider trading.



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