The Motivation And Supervision Of Insider Information Leakage In Chinese Stock Market

Insider information leakage is one of the typical illegal actions in security market.Insider information leakage does not only disturb the trading principle and inhibits the efficiency of the resourses distribution,but also cause enormous harm to investors.Since Insider information leakage is always the main cause of the insider trading,and it has the characters of strong expertise,low cost and difficulty to obtain evidence,current research just puts insider information leakage and insider trading together.This paper considers the motivation of the listed companies’ insider information leakage separately as the research target.And also the paper combines theories of psychology,economics and laws to find the resaons of information leakage and try to give advice to regulators,it is very rare in this field.First of all,this paper uses the frame of economics and crime in the field of insider information leakage first time,which is very innovative.We use the method of cost and return to analyze the motivation and strategy of insider information holders.Because of the character of insider information leakage is very professional,this paper combines the knowledge of psychology and economics to model the psychological change of insider information holders.We find that legal punishment,corporate governance structure and psychological factors are the main factors of insider information leakage.Specifically,on a personal level,the satisfaction from illegal leaks to others has positive incentive effects.On the contrary,the psychological perception of leakers,the consideration of negtive impact and high degree of education level have the inhibiting effects on insider information leakage.Besides,we introduce the degree of listed companies’ management level as a new variable to give some advice for preventing leakage of insider information.Secondly,distinguishing from most theory research,this paper uses the method of questionnaire to do some quantitive analysis on the motivation of insider information leakage.During the research,the paper divides four different types of people who leak the insider information including managements of the companies,intermediary organizations,supervision department Outsider members.On research method aspect,we build a comprehensive factor achitecture and get some important results base on 243 valid questionnaires.Firstly,the combination of all factors influences the actors’ choice tendency and negative factors9 functions are more import than the positive factors’ functions.Secondly,the more strong control ablities the actors have,the less possible the insider information leakage would happen.Thirdly,the material index has the opposite direction of expectant return of leakages.The higher index means that the actors have less desire to break the law.And we also conclude that government should build a different level supervisory archtecture because of the different type of insider information holders.Thirdly,since leaking insider information is illegal in most countries（regions）,getting deep understanding of how law play the role of preventing insider information leakage is very meaningful.This paper uses empirical study on some tipical contries law about insider information leakage.The paper selects 50 contries as samples to illustrate the inhibition mechanism of insider information leakage from both legislation aspect and regulatory aspect.The result shows that:At the legislative level,the law improvement is conducive to protecting investors’ interests and reducing the probability of occurrence of insider information leakage.At the law enforcement level,the regulators’ abilities to capture and the desires of execution are the factors to promote security market development,but it is not the most important factor.The most important factor which can inhibit insider information leakage is government’s intervention on the security market.Fourthly,to prevent insider information leakage fundamentally,on one hand,it depends on the severe punishment,on the other hand,we should build an incentive mechanism.This paper uses capital market refinacing activity as an example,suggesting that the government should rating the level of keeping information hold by listed companies,and give some priorities to the companies which have the higher level of obeying the law.Compared with the sistuatons which have no incentive mechanism,the research shows the incentive mechanism can not only lead the companies obeying the law and keeping the insider information,but also make them to improve the management system by themselves.Lastly,we conclude that the motivation of insider information mainly consists of three layers:law regulation,corporate governance and individual psychological.However,the current regulation method is dominated by punishment after insider information leakage.Therefore,this paper suggests new regulation system should be set up which includes three procedure:"guard in advance—monitor in real time—punish after the event".Besides,some incetive measures which can enhance companies’self-regulation should also be used in this system.And we hope the reseach of this paper can provide certain reference to reduce the insider information leakage and promote China’s securities market development.