Reseach On The Issues Of Insider Trading In China Stock Market

After more than3decades of rapid development, China stock market has become an indispensible part of Chinese capital market, and played an important role in the aspect of direct financing for enterprises. However, compared with foreign mature stock markets, regulations of the China stock market is not very perfect, and all kinds of violation behavior emerge in endlessly, with insider trading is most serious. Insider trading is a behavior that people own the information trade stocks by using the information ahead of other market players. It can destroy the normal order of the stock market, and damage the interests of listed companies and other market players. Therefore, how to carry on the regulation on insider trading and prohibit it is the problem that Chinese scholars have been trying to solve.Based on the existing research of domestic and foreign on insider trading, this article will do a comprehensive study on insider trading of China stock market. Firstly, this paper defines the related concepts of insider trading, and using the theory of economics to do theoretical analysis on insider trading. Secondly, from the perspective of normative analysis, the use of punishment on insider trading cases from2001to2012as sample, carries on the analysis about the present situation of insider trading, and summarizes the characteristics of insider trading of China stock market. Further, the paper uses event analysis for these samples to do empirical research, and summarizes insider trading behavior patterns by measuring the average abnormal return (AAR), the cumulative average abnormal return (CAAR), announcement effect and insider trading effect. The empirical results show that insiders use insider information in three days before the disclosure of information to operate stock trading, huge gains can be obtained. On the other hand, if other traders operate stock trading after the disclosure of information, they cannot obtain the proceeds, but become the stepping stone of insiders’further operation. Based on the angles of normative and empirical analysis, we get the facts of insider trading in China stock market. Then the paper will discuss the reasons of the insider trading exists from three aspects with the motivation of insider trading formation, condition of existence and environment condition, and get some advises to regulate insider trading from the construction of the legal system construction, supervision system, information disclosure and internal governance structure of listed companies.