Research On The Relationship Of Margin Trading And The Profitability Of Insider Trading In China's Stock Market

Since China's margin trading business been launched on March 31,2010, the number of stocks that are eligible for margin trading has exceeded more than 900, and the margin balance has once exceeded one trillion yuan. The impact of margin trading on the stock market has attracted more and more attention. Insider trading of China's listed companies has always been the concern of the market because insider s are generally able to obtain abnormal returns from their transactions. This paper studies the profitability of insider trading happened one year before and after the five subject adjustment events during March 31,2010 and September 22,2010. The results show that the ability of the insiders to profit from the mispricing of the stock price is significantly lower after the stock is included in the margin trading subjects, and the influence of the insider trading is more significant for selling transactions. The study also found that after a stock become eligible for margin trading, thetransactions of insider will bring a more intense market reaction. In addition, for both the profitability of the transaction or the market reaction, the impacts of a stock becoming eligible for margin trading are showing a gradual increase trend. Finally, on the basis of the conclusion of the article, the paper puts forward some corresponding policy suggestions on the basis of the current situation and existing problems of China's margin trading business.