Insider Trading,Internal Control Quality And Capital Allocation Efficiency

The research on insider trading has a long history.In theory,it is mainly based on information asymmetry and principal-agent theory.It pays attention to the excess returns and the reasons for its acquisition.In practice,it is strictly regulated by the capital markets of various countries,especially in China.In May,the China Securities Regulatory Commission issued the "Several Provisions of Shareholders and Directors of the Listed Companies to Reduce Shareholdings",marking the study of insider trading from a simple excess return and acquisition reasons to the transfer of shares,fund allocation,and stakeholders.Influence multiple perspectives.The same is due to the information asymmetry and the objective existence of the agency cost,which will make the external financing cost of the company higher than its internal financing cost.The greater the difference,the more serious the financing constraints faced by the company,and the different financing constraints make the company Insufficient investment or over-investment in the face of investment opportunities can affect the efficiency of capital allocation.At the same time,since China's 2008 "Basic Standards for Enterprise Internal Control" and the 2010 "Guidelines for Internal Control of Enterprises" have been promulgated and implemented,internal control has become a research hotspot.When the internal control quality of the enterprise is high,the design and implementation of good internal environment,risk assessment and control activities can reduce the hidden dangers caused by the agent's moral hazard.Under the perfect information system and supervision feedback mechanism,the internal information is asymmetric.The level is lower,and the goals of agents and shareholders tend to be the same.On the basis of common theory,this paper carries out further theoretical analysis and empirical test on the impact of internal transaction,internal control quality and the combination of the two on capital allocation efficiency.Conclusion found:1.The lower the quality of financial reports based on the quality of earnings,the lower the transparency of information that external investors can obtain,and the higher the degree of information asymmetry;the accrued earnings management leads to more obvious information than real earnings management.symmetry.Compared with the insider's purchase,the insider's selling behavior is more significant,which aggravates the information asymmetry.Accrued earnings management or real earnings management plays a regulatory role in the process of internal information transactions aggravating information asymmetry.On the whole,insider trading,especially selling transactions,is more likely to affect the quality of financial reporting through accrued earnings management activities,thus increasing the degree of information asymmetry.2.In terms of the relationship with financing constraints,internal control quality can restrain financing constraints,while the impact of insider trading excess returns on financing constraints has different conclusions depending on the buying and selling direction and time window,and internal control Quality and short-term window insiders buy excess returns to play a substitution effect in the negative impact of financing constraints;long-term window internal control quality plays a regulatory role in the process of insiders buying excess returns to improve financing constraints.The internal control quality of short-term window and long-term window plays a regulatory role in the process of internal sales of excess returns positively affecting financing constraints.3.In terms of the relationship with investment efficiency,the quality of internal control can effectively improve the efficiency of the company's investment;the internal transaction can promote the improvement of investment efficiency as a whole;in a short time window,the quality of internal control is positively affected by the sales of insiders.The substitution effect was exerted in the process of investment efficiency.Further,according to the median grouping,the financing constraints can be found.On the whole,in the high financing constraint group,the insider trading has a positive effect on the investment efficiency,and the internal control quality and the insider trading are not only in the long-term selling behavior.They played a complementary role,and others still played a substitution role.The innovations in this article are reflected in the following aspects.First of all,from the domestic and international,especially China's normative process of insider trading,it can be seen that although insider trading has experienced a process from prohibition to release,the restrictive provisions of securities supervision on insider trading tend to be stricter.Including the "Company Law","Securities Law" and the regulations of the CSRC,the restrictive provisions for insider trading are external requirements,and there is no way for the company itself to explore insiders through the internal corporate system through the corporate governance mechanism.The process by which a transaction acquires excess returns and how internal systems affect insider trading.This paper combines the 2008 "Basic Standards for Internal Control of Enterprises" announced by the Ministry of Finance and other five ministries and commissions and the "Guidelines for Internal Control of Enterprises" published in 2010.From the perspective of internal control quality,it analyzes the internal control in the process of internal people trading affecting the efficiency of capital allocation.The substitution or coordination function has certain innovative significance for supplementing and perfecting the "Company Law" and "Securities Law" from the internal system level and the above-mentioned restraint mechanism of the CSRC departmental rules on insider trading.Secondly,although the causes of financing constraints have been expressed in a]arge number of existing documents,the research results from the perspective of insider trading are still relatively few.This paper proposes that the amount of excess returns of insider trading conveys the extent to which insiders use information superiority.The amount of excess returns reflects the severity of information weakness of external investors.In response,external investors will make adverse selection.The company that acquires more excess returns from insider trading will not continue to be the investment target of external investors.At this time,although insiders obtain excess returns through transactions,they are gradually"away from" by external investors.The company's stock liquidity has declined,and the difference in internal and external financing costs has intensified,which has led to a high degree of financing constraints.On the other hand,due to the important position of insider trading entities in the company's investment and financing decisions,the impact of insider trading on investment efficiency has important research value.Combined with the direction of internal people trading and different periods,it is the study of this paper in which large space has been left.As of now,the relevant literature is mainly based on foreign research results,and there are few domestic related studies.Third,combined with the existing literature and theoretical analysis of this paper,high internal control quality can alleviate financing constraints and improve investment efficiency.The more internal transactions and the excess returns they receive,the more likely they are to lead to higher levels of financing constraints.And whether the impact on investment efficiency is certain,and there is no final conclusion.Especially if the main body of both is the high level of the supervisor,is there any mutual effect on the impact of capital allocation efficiency?This paper analyzes the interaction effect and internal people.Theoretical analysis and empirical tests were carried out on the synergy or substitution of transactions and internal control quality.