The Effect Of Information Leakage And Insider Trading On Stock Market

We have a short history of the development of capital market,capital market regulation is lagging behind,there are a lot of leaked questions about information disclosure of listed companies,and this leads to substantial insider trading activities.Information leakage and insider trading are not only violate the fair principle of security market,but also seriously affect the efficiency and order of the market.This activity hinder the development of capital market,and infringes on the interest of the small to mid size investors.In recent years,with the development of Chinese stock market,the market structure and mechanism are building and perfected,also the legislation of insider trading reduced the illegal activities.Despite the strict legislation,the cases of insider trading emerge all the time.According to information type,the occurrence of the year,industry and scale,we classify the information leakage and insider trading.Then we find that the essential cause of information leakage and insider trading is the corporate governance: the better the structure of governance,the fewer information leakage scale.In this paper,we chose the performance forecast from year 2004 to 2013 of Shanghai and Shenzhen some of the listed companies as the research objects,using event analysis by examining the information disclosure of listed companies and comparing the gain difference before and after the stock information disclosure.We first ensure the cause of abnormal return,whether it is the information leakage or market expect.Second this paper studied the present scale of information leakage in our stock market and the effect of different type of information.Then based on this,we studied information disclosure of listed companies in the short and long-term market effects,and to further explore this kind of information leakage underlying causes and influencing factors.Our research shows that:(1)The cause of the abnormal return ahead of the disclosure of performance forecast statement is the existing of information leakage and insider trading,not because of the market expect;(2)In our country,there have been substantial information leakage and insider trading before the listed companies disclosed their statement.We can see there is a interesting trend of the information leakage from year 2004 to 2013.The scale first declines and then goes up again;(3)We also find that different information type leads to distinctive information leakage scale.Compared to good news,bad news will more frequently be used by insiders causing information leakage and insider trading;(4)The short-term as well as long-term value of listed companies will both be decreased by the occurrence of information leakage and insider trading.The more information leakage,the lower long-term value of companies,the information leakage will have a long-term effect on firm value;(5)There is an obvious negative correlation between corporate governance structure and information leakage degree.The primary cause of information leakage is the failure of corporate governance.We can see that a company with a high level corporate governance,the information leakage degree will be lower,compared with those less good corporate governance companies.In the end of our paper,we give some proposals from the aspects of corporate governance to the management of companies as well as the regulation and prevention of information leakage and insider trading.