Does Margin Trading And Short Selling Aggravate Insider Trading

The implementation of margin trading and short selling system marks further improvement of Chinese security market,which has significant meaning.Some studies show that margin trading and short selling will aggravate insider trading,on the other hand,there are a lot of individual investors in domestic market,which creates a strong speculative atmosphere and provides a new way of trading for speculators.Based on the two cases of exceeding expected or not expected for annual earnings per share,the annual reports are divided into positive annual reports or negative annual reports,this article applies the method of event study to find that in A share market,there exists obvious insider trading before the release of positive and negative annual report,Margin trading and short selling system does not significantly aggravate the impact of insider trading before the annual report was released.By regression analysis of annual sample from 2010 to 2016,we find,in Chinese security market,the insider trading has been improved after 2012.Through analyzing the influence of margin trading and short selling on stock return,we find that before the release of annual report,abnormal fluctuation of margin trading and short selling will have significant influence on accumulative stock return,short selling has no significant impact on insider trading before negative annual reports and margin trading has no significant impact on insider trading before positive annual reports released.Considering the impact of market transaction activity and the proportion of institutional investment,we find that in high activity or high proportion of institutional shareholding market,short selling trading aggravate the impact of insider trading before the release of negative annual reports.