| Although illegal insider trading in the capital market is concealed and complex,it does change stock informative content and transfer inside information into stock price before it becomes public,which causes unfair trading.While surveillance of illegal insider trading is improved in China and many regulations have been introduced,the number of illegal insider trading cases is increasing every year.Regulators of Chinese stock market mainly confiscate and fine those inside traders as penalty.Do the current penalty rules on illegal insider trading contribute to the unsatisfactory effect of surveillance enforcement? How well do our current regulations of illegal insider trading perform? What type of supervision will be more effective?In this research,we study the illegal insider trading cases from 2004 to 2017 on the official website of the China SEC,can calculate illegal “gain-fine ratio” enforced by the China SEC.Then we provide concrete descriptive statistics and analyses mechanisms of surveillance effect.Based on it,we design an empirical test to measure the effect of illegal insider trading on stock informative content and the effect of current regulations using unbalanced panel model.Our main findings are as follows: In general,inside information enters stock price through both illegal insider purchase and sale,which increases market information asymmetry;As for different types of illegal insider trading,the M&A related type of illegal insider trading has the most significant effect on stock informative content on the trading day while cooperative operation “and” investment related illegal insider trading has the least significant effect.From the perspective of market regulation,the current regulations cannot effectively refrain the increasing market information asymmetry caused by illegal insider trading and the indiscriminate “gain-fine ratio” method cannot effectively restrict those illegal insider trades which cause the most harm to public investors.In the end,we propose our suggestion that different types of illegal insider trading should be supervised and treated discriminately. |
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