Study On The Insider Trading Incidents Of GEM Big Shareholders’&senior Executives’ Share Reduction

This thesis focuses on the issue of insider trading by introducing the concept andcontent of it, summarizing relative studies and theories and analyzing its features. Settingout from the aspects of the influence of insider trading to the performing risks of the stockmarket, information efficiency, mobility of stock market and stock prices, this thesismakes a theory introduction and summary. The review of literature shows the insidertrading will impair the equality, justice and openness of the stock market. At the sametime, it decreases the efficiency of resources allocation and increases the risks of trading,which will result in the high finance costs and managing risks for the listed companies.Then this thesis introduces and summarizes the researches and studies on the largeshareholders and executives’ reduction behavior in GEM-listed companies, as well astheir motivations from the respects of corporate control structure, major shareholdersemptied and support behavior, the company’s financial performance and macroeconomicpolicies and market trends. And then makes a conclusion and analysis on informationasymmetry, information leak and earnings management of the reduction behavior andinsider trading.It also makes statistical analysis of reduction behavior from2009to2013aboutGEM listed companies from multiple levels. It is found that the large shareholders andexecutives’ reduction behavior of GEM companies are relatively common, and with theincrease of GEM companies it become more and more severe. Comparative analysisbetween different executive’s positions and ways found that they increase their stockholdings in small amount while reduce their stock holdings in large amount. Meanwhile,they choose block trading and auction to reduce the stock holdings. In this process, theirreduction behavior is successful due to their relatives’ resignation. This shows executivescan operate the market and grasp the situation.it uses event study to conduct empirical study on all the lifted GEM companieswhose reduction behavior published by the Exchanges from2010to2013. It analyzed theinsider trading of major shareholders and executives behavior through turnover,cumulative long yields, index analysis of the publishing effect. It is found that theseshareholders have precise timing ability, thus the reduction behavior is accompanied withinsider trading.On the basis of empirical research, this thesis analyzed and discussed the GEM major shareholders and executives’ motivation and the cause of reduction behavior. itpoints out that there are some flaws in the corporate governance structure, and since thecompanies deviated from the original goal in the development process, their expectedresults were not achieved. In this case, driven by personal interests, major shareholdersand executives choose arbitrage. Due to the secrecy of insider trading and difficulty ofobtaining evidence, major shareholders and executives conduct large-scale insider tradingin the process of reduction.Finally, based on the above analysis, this thesis proposed some suggestions on theregulation of security trading. It is suggested that the governance of company and theincentive mechanism should be strengthened, and the information disclosure system oflisted companies should be improved, and the supervision of regulatory authorities shouldbe enhanced.