A Research On Insider Trading In China’s Stock Market:Formation Mechanism And Economic Consequences

First, Research Background and PurposeIn an efficient capital market, the information should be disclosed to investors accuratly and timely. The professor Bernard Black from Stanford University considerd that a strong capital market must have two primary conditions:First, investors would be fair to get the information of the company; Second, investors believe the company’s insiders will not cheat them out of investment.However, in reality, the disclosure of information are serious differences, not all information can be promptly passed on to investors. Insider trading is based on this information asymmetric information arising from unethical behavior. Although China’s securities market is an emerging capital markets, the establishment and development time is still short. In the companies’information disclosure, corporate governance, securities market regulation, we are not mature enough. Insider trading problem is more serious. Although the goverment realized the dangers of insider trading, and increased the monitoring of the market insider trading and market manipulation, but did not fundamentally.Therefor, the paper wants to get a clear understanding of the formation mechanism of the stock market and economic consequences. Including the following points:What is the high incidence of stock market insider trading cases in China? What are the main factors that affect the behavior of insider traders? What kind of impact on China’s listed companies and securities markets after the release of insider trading?Second, Main Content.The paper used theoretical model, empirical test, event study and case analysis, can be divided into eight chapters:The first chapter is the full text of the paper. The first chapter introduced the portion of the transcript, background, significance, the Interpretation of the key concepts, summarized the research ideas and content of the innovation.The second chapter is the literature review, insider trading study of the foreign literature and domestic literature were reviewed.The third chapter describes the system evolution and current situation of China’s stock market insider trading, the process of insider trading legislation of insider trading. Then, this part Collects insider trading data and a statistical description of insider trading behavior characteristics were analyzed.The fourth Chapter is to explore the impact factors of insider trading. Through theoretical analysis and empirical test, the following conclusions:under the premise of information superiority, as a rational economic behavior of people of insider trading by the inevitable use of information superiority profit; China’s capital market corporate governance imperfect and provided favorable conditions for the generation of insider trading; non-normal major events for insider trading provides an opportunity to use major news profit has become the basic characteristics of the insider trading; Fourth, government regulation as a insider trading constraints, influenced the severity of the insider trading.The fifth chapter selected the black sample and white samples, the ratio of the excess rate of return of the two samples after the window period, investor sentiment and the degree of information asymmetry has been studied. the following conclusions:firstly, after the windows have not been compared to the listed companies of insider trading, insider trading of listed companies is significantly lower; secondly, after the window period, the insider trading of listed companies in investor sentiment is significantly lower; thirdly, during the event window, compared to the insider trading of listed companies, the listed companies of insider trading information asymmetry is more serious.The sixth chapter explores the negative impact of insider trading for listed companies. the following conclusions:the SFC has given the punishment of senior management was more serious than other personnel; insider trading of listed companies facing investors of collective civil action for damages, listed companies bear a heavy economic price; the occurrence of insider trading may lead to abortion of the company’s major decision-making program; insider trading listed company’s reputation will be seriously affected.The seventh chaper from a legal perspective, institution building and technical point of view of insider trading, to improve the regulation of insider trading policy recommendations.The eighth chapter is the conclusion and policy proposal. The paper from a legal perspective, listed companies and institutional construction and insider trading monitoring technology point of view put forward to perfect the policy proposal of insider trading regulation.Third, The academic contribution and innovation of this article:Firstly, the paper has researched the factors to impact of insider trading.And the paper uses the theoretical analysis and empirical test, obtain excess returns from insider trading, corporate governance, major incident and the government regulatory. The accumulation of these studies enrich our theoretical and empirical literature on the impact factors of insider trading. Secondly, At home and abroad for insider trading, more study concentrated in the securities market during the event window, This is the first study of insider trading extended study insider trading window after the stock market reaction. Thirdly, the measure of the economic consequences of insider trading in the previous literature are few, our paper measured a series of indicators of investor sentiment, the degree of information asymmetry, and punishment;the other hand, the research method used case analysis, enriching the economic consequences of the research literature.