Research On "Information Boundary Circle" Phenomenon When Information Is Transferring In Listed Companies

Stock market started late in China, although it developed fast and has got some effects, the market now only functioning in low efficiency, it is very hard for it to optimize the resources. The stock market is still a newborn and immature market compared to developed countries which have consummate and mature markets. As the size of Chinese market extending bigger and bigger, more and more people participated in it, some people operate in irregular way for the sake of substantive revenue. These activities destroyed market efficiency and harmed the benefits of investors who have less stocks. As the reasons above, there exists time difference when information of listed companies changing from private information into public information, in other words, there exists "Information Boundary Circle" when listed companies'information is transferring to the outer space. This makes many people suffered big loss when they got lagged information. "Information Boundary Circle" weakened the enthusiasm of investors, it impacted the prosperity and stability of Chinese stock market.This article used "event method" to analyze "Information Boundary Circle", analyzed the sample companies'Cumulated abnormal return (CAR) in form of data and charts, especially analyzed four kinds of samples:mergers, assets removal, assets replacement and large-scale assets dealings. This article classified the four kinds of samples into two: unexpected surplus positive and unexpected surplus negative. Then analyzed the four kinds of events separately, got the result that samples of mergers and assets replacement have obvious "Information Boundary Circle", while there has no obvious evidence that samples of assets removal and large-scale assets dealings have "Information Boundary Circle". Subsequently, this article analyzed the case of IBM company purchase Lotus company and the case of Guangfa Securities insider trading. These two case studies further proved the conclusion that there exists "Information Boundary Circle" when listed companies' information is transferring. This conclusion is not only suitable for Chinese stock market but also suitable for foreign developed markets. In the end, this article analyzed the causation of "Information Boundary Circle" and gave some suggestions for control this phenomenon:specify the target, harder punishment, strengthen company government, speed up the construction of information disclosure and advocate investor education.