Research On Problems Of Insider Trading In Chinese Stock Market

The stock market of China is being in the transition-period expanding to the growth from fast development at present, experienced the start stage in the 80s of last century and then the fast development phase.The achievements made by the securities market are obvious to all, but behind the rapid growth, some problems still exist. China's stock market often occurs sharp fluctuations caused by human factors. All violations have occurred from time to time, insider trading is one of the more common violations.Because of the unfairness of insider trading, insiders gain in the stock market and make the use of insider information to avoid risks. It is directly harmful to the securities listed companies, investors and the securities market and the country's interests. The negative impact on the stock market is relatively large. In today's society, the steady development and operation of the stock market has become a booster for economic development. In order to maintain a sustained and healthy development of China's economy, we must solve the problem of insider dealing in the stock market. The purpose of this paper is to explore how to take advantage of existing community resources to forbidding insider trading, improve efficiency of regulation and safeguard the healthy development of the stock market. Hope that through this research we can provide government regulatory bodies with decision support to improve the efficiency of supervision.In the first chapter, we review the domestic and overseas literature about insider trading. On the basis of the first chapter, in the second chapter we have a review and analysis of economic theory both in favor of insider trading and against insider trading. We think although there are some positive effects of insider trading, but from a long-term and general view, it is necessary to prohibit insider trading. During the process of government's supervising ,insider trading can be divided into insider trading based on macro information and insider dealing based on microscopic information ,and insider trading based on microscopic information also can be divided into a purely insider dealing and insider trading associated with other violations.Insider trading, because of the macro-control departments leaked ahead of time, that would cause adverse impact on the entire stock market, so there should be a total ban. Being a widespread phenomenon of insider trading based on microscopic information. The costs of management are relatively high. Taking into account the positive impact on the stock market to a certain extent, the government can take appropriate regulatory policies. For the micro insider trading associated with other irregularities, which seriously disrupted the normal order of the stock market, therefore, we must crack down. On insider transactions for purely microscopic, we should take target for control. Government regulatory bodies can address the specific regulatory measures aiming at the different insider trading, limited regulatory resources to achieve the greatest regulatory effect.In the third chapter we separately have conducted the real diagnosis research about insider trading based on macroscopic information and insider dealing based on microscopic information .We selected 15 pairs of macroscopic events having a major impact on the stock market. Compared the fluctuant of index on T date to that on T-1 date, also the fluctuant of index on T-1 date to the average fluctuant from the T-5 date to the T-2,as well as the trading amount on T-1 date to the average deal amount from the T-5 date to the T-2, we discovered there are 11 events in 15 ,the stock market has the obvious change in the T-1date, the market index has made the response ahead of time, the T-1date dealing amount has been opposite to most recent several days mean values , had the remarkable undulation, therefore was allowed to recognize these macroscopic policies are revealed ahead of time.We have an empirical analysis of insider trading on micro levels applying the event methodology. We randomly choose two kinds of events which every kind has 15 samples. One kind of events is melon-cutting; another kind is purchases-annexations. we find ,3 samples in the first kind of 15 samples , the accumulation unusual incomes rate is not zero remarkably; 4 samples in the second kind of 15 samples , the accumulation unusual incomes rate is not zero remarkably. Simultaneously we discovered the accumulation unusual income rates of 30 samples are all quite big, therefore we thought the insider trading based on the microscopic information is also common. On the basis of theoretical analysis in the second chapter, in the third Chapter, we verified with empirical testing that insider trading can be divided into macro and micro levels. Research conducted through random sampling, we find the insider trading based on microscopic information is relatively common, Insider's additional revenue is much more, that impact the specific stocks badly. We believe that the state should focus on two types of insider dealing in formulating relevant policies, improve the efficiency of regulation against insider trading, and safeguard the healthy development of the stock market.In the fourth chapter, we use a game model based on complete information to analyze how to improve the efficiency of regulation. In the game model, in addition to taking into account the costs of supervision, the additional revenue of insider staff and other conventional factors, also in light of the actual situation .In the payoff matrix introduced the social costs associated with the game closely. Variable D is the cost of integrity when insider commit a crime;-N (N>0) is the negative impact because the deterrent effect weakened and the credibility of investors to regulatory departments declined when regulatory departments were not supervising; T (T>0), speaking on behalf of positive impact because of the deterrent effect on other insider increase and the reputation effect is improved when having effective supervision and monitoring .We found a Nash equilibrium by analyzing the hybrid strategy game on both matrix model, In this equilibrium point, insider's supervision and the proceeds of insider are all expected to reach a maximum. Assuming changes in the different variables and then examines how to improve the efficiency of regulation. Through Game analysis, we know that the government raise the probability of monitoring, increasing the severity of punishment, increasing the costs of integrity can be effectively reduced the incidence of insider trading. Meanwhile, we also found to increase the penalties and increase the costs of integrity will enable the supervisors to achieve the higher supervising and managing efficiency by the smaller supervising and managing cost.To enhance the efficiency of supervision, monitoring department's efforts alone are not enough, needs the mutual coordination of the social each correlation link. In Chapter 5, we propose the regulatory departments should improve information disclosure system, standardize the information disclosure of listed companies and the government acts, the news media and the public should be brought into full playing the role of supervision and mobilize all social forces to crack down on insider trading. By establishing clear civil insider trading system and the establishment of credibility evaluation system, the cost of insider will effectively increase, the occurrence of insider trading will decrease.