The Empirical Research Of Insider Trading In Chinese Security Market

As a kind of fraud tradings,insider trader exploit inside information in their tradings,which makes ordinary investors sustain a great loss,cause great damage to the fairness of security market,and therefore strangling the healthy development of security market in long-term.It has been prohibited by Chinese Security Law since it was issued.When Security Law was first issued in 1993,insider trading was listed "Prohibited Principlly".Later in the 1998 revise,insider trading was listed "Prohibition" for the first time.It counts much to protect ordinary investors,promote China's security market steadily and healthily by preventing insider trading strictly,monitoring insider trading closely,and fighting against insider trading severely.The first part of this paper introduces related theories about insider trading,which includes the definition of insider trading,the recognition of insider trading,the cause of insider trading,and its harm to market and investors.Also,this part mentions insider trading monitoring in China,and the statistics method in recognizing and estimating insider trading.In the second part,this paper gathers insider trading cases claimed by China Securities Regulatory Commission(CSRC)in 2016 together,compared with former study.From the compare,it is found that new features appear in insider trading in recent years.Later in this part,the paper uses data of quoted companies in The Shanghai A-share stock market which claimed mergers and acquisitions in 2016,eliminating those which failed in claimed mergers and acquisitions,or data deficiency.The paper exploits Event Study Method,calculating Average Excessive Rate(AR)and Cumulative Average Excess Rate(CAR)then analyze them in order to illustrate the status of insider trading in China's security market.The last part of this paper offers policy proposal aimed at preventing and striking insider trading.Policy proposal are addressed from these aspect:Recognition;Penalty;Proof and Monitoring;Information Disclosure;Publicity and Education;etc.The paper argues that the information keeper's failure in information conservation should be blamed and be punished.Moreover,information disclosure of quoted companies should be more strictly demanded.Ordinary investors should be educated more comprehensively before they step into security market.Only by efforts of all parties will insider trading be effectively prevented and restricted.