Venture Capital’s Impacts On Informed Trading

In our country, investors received absolute advantages relatively to the others byinformed trading, won far more than the average pay of the market. That is to say, insideinformation is equal to the risk-free return in the stock market in some level. In addition,whether the venture capital institutions or financial institutions or the employees(including managers and securities analysts) or the company’s executives, through theinformed information market manipulation and high volatility in share prices, theyobtained their own interests at the most. Obviously, lack of effective regulation, it willpose a large threat to prosperity and stability of the market development.From the perspective of academic significance, this article mainly analyze theprobability of informed trading from the angle of the investment risk and also talk aboutthe two variables explanation in the probability of informed trading from venture capitalshareholding directors. From this angle, this group can be subdivided and we canchoose institutional investors that can contact to the internal information as theshareholders or investors of listed companies directly, which can renew the theory ofinformed trading in theory and reveal academic significance.From the angle of the practical significance, venture capital become shareholdersin the listed company in advance, and stationed staff into the board of directors of thecompany. So no matter from the perspective of the shareholders or the directors, theycan know the inside information of company at the first time, then they use insideinformation in the secondary market to trade stocks and obtain the excess returns fromthe investment. Not only aggravate the insider trading, but damage the rights andinterests of small and medium-sized investors more seriously, this will ask more also toour country legal laws and regulations.This paper is based on the view of the securities market microstructure and on thebasis of the informed trading theory to measure and establish the gem in our countrythat the venture capital institutions in the theoretical in basis of the impact ofknowledge information transaction, and then build model for empirical analysis.Specifically,(1) This paper has made qualitative analysis on the research object, mainlyon the influence of mechanism of gem stocks by the risk investment. On the one hand,defining the venture capital and venture capital investment in the gem analysis, on theother hand, thr paper has carried on the theoretical analysis and put forward the research hypothesis.(2) The empirical part, this paper has done the high frequency data of gemlisted companies, and done the likelihood estimation by using the EKOP model, thendeducing the probability of informed trading PIN value. Then by using the groupingdata and descriptive statistics, according to venture capital shareholding and corporateexecutives shareholding, the whole sample data was divided into four groups, thendoing the vertical comparison and horizontal comparison of the inter-temporal packetdata analysis,then doing the t test and established the multiple regression model.(3)Through the multiple regression model, under the control of the risk investmentholdings,the market trading behavior and company characteristic variables hassignificantly positive correlation with the probability of informed trading PIN value.The risk investment will increase the advantages of the conclusion of informed trading.This article’s possible innovation mainly includes the following two aspects:(1)On the research angle of view, scholars at home and abroad said the probability ofinformed trading PIN value is currently limited to transactions, corporate characteristics,equity holders features which carried on the analysis of the research. Whether from therisk investment holding or the director, we analyze the influence factors of probabilityof informed trading PIN.(2) The research sample suggested that this article selects riskinvestment into listed company as data sample, because the distribution of riskinvestment in the gem listed companies possesses universal, so that can reflect theresearch idea of this article.