Research On Insider Trading Supervision And Governance In China's Securities Market

The insider trading in securities market has already been the key problem infecting the normal operation of the Chinese stock market. Currently, our insider trading regulation still focuses on post-supervision, while, the disadvantage of post-supervision lies in its hysteresis. In other words, damage has occurred when regulation began to operate. So, how to play the role of deterrent and make the market order back to normal is the extremely important issue of China Securities Regulatory Commission (CSRC).Based on the view of cost and income, this paper constructs the evolution game model of people knowing insider information and the CSRC using evolutionary games theory. This paper also analyzes the stability of this model and solves the equilibrium. The results show that when CSRC choose to overlook the insider trading, the people with knowledge of inside information will not choose normal trading actively; when the cost of regulation is too high and the income of insider trading is more than normal trading, this system has the equilibrium solution but not optimal solution; if people with knowledge of inside information can gain the net earning deducting the punishment that is more than the income of normal trading, they will not choose the normal trading although CSRC choose to regulate the insider trading actively; people will choose to return to normal trading gradually under the regulation of CSRC when they face the less income and more punishment.This paper also carries out the empirical study and model simulation. Through the 37 samples involving insider trading, this paper calculate the excess return rate, average excess return rate and accumulated excess return rate of insider trading. Through the empirical study, it verifies that insider trading will bring greater benefits with a high probability for insider trader. It also verifies the elusion of insider trading. The elusion also adds the regulation cost of CSRC move the insider trading forward. The penalty of samples shows that the crime cost in our country is very low compared to developed countries like the United States. This also verifies the results of evolutionary game model. The results of simulation through Mat lab also show that increasing our punishment level will accelerate insider trader choosing normal trading.Investigating the insider trading and promoting them back to normal trading is very difficult and we cannot only rely on CSRC to solve this problem immediately. But we must realize that CSRC needs to do more facing the insider trading and only in this way can we have more hope. Finally, this paper puts forward policy suggestion from four aspects. First we need to strengthen the information disclosure and improve the transparency of information of listed companies. Second is to increase the intensity of punishment and improve the illegal cost. Third we need to strengthen monitoring of inside people and clear the scope of inside people. Fourth we need to perfect report incentive mechanism of insider trading and improve the regulation efficiency.