Research On Excess Earnings From Insiders' Kinsfolk Trading In Chinese Listed Companies

With the development of China's capital market,the supervision and management of the securities market have become increasingly perfect.Insider trading regulation laws are also becoming perfect gradually,so insider stock trading is developing toward standardization.I have learned from past scholars' research to define insiders as directors,senior managers and supervisors of listed companies.In China,The "Securities Law" "company law" and "The rules of company's directors,senior managers and supervisors hold the stock of the company and its change management" issued by China Commission 2007 are the three magic weapons to control the insider trading of Listed Companies in China.But the object of control is only " supervisors,directors,senior managers of listed companies and shareholders holding more than five percent of the shares".China's "Securities Law" expressly prohibits insiders from conducting short-term transactions and sets out a sensitive period in which it prohibits stock trading,but the relatives of the insiders are not subject to this restriction.At present,restricting insiders' relatives buying and selling stocks of their own companies,there is only one ‘Business guidance'.However,in the guideline,the relatives of the insiders do not have any explicit requirements except for the obligation to declare and disclose in the 2 trading days after the sale.But in recent years,insiders' relatives have traded stocks more frequently than insiders themselves.This exposes the regulatory loopholes in the trading of insider kinsfolk,which not only undermines the confidence of external ordinary investors,but also seriously jeopardizes the healthy development of the capital market.So,urgently need to be emphasized by the regulatory authorities.This article is based on our country's capital market is effective,but does not achieve strong and effective,so the internal information can bring excess returns.It also holds that the insiders' relatives and ordinary outside investors own different information based on the theory of information asymmetry.And then the game's Nash equilibrium is introduced to analyze the interaction between insider relatives and external supervision.Based on the insiders' kinsfolk trading data in October 2007-October 2017 from Shenzhen Stock Exchange public information,This article first describes intuitively the status of insider stock trading,and then uses empirical methods to perform a series of studies on excess returns.Event study method is used to compare the returns obtained by external investors' normal transactions with the returns obtained by insider relatives' transactions,and use T-values to test and analyze excess returns,and from CAR shows that sell transactions have better timing ability and profitability,so it is likely to contain more insider information.Also concludes that insiders' kinsfolk can get excess returns indeed.Then,in the multivariate linear regression analysis,this article continues to study several variables that affect the formation of excess returns,such as transaction size,transaction period,intrinsic relatives,and so on.After coming to conclusion through empirical analysis,the impact on the trading of insider relatives is analyzed from three sides,the securities market,listed companies and external ordinary investors.Finally,relevant policy recommendations were given,and make a systematic summary of the full text.