An Empirical Study On Insider Trading Of Growth Enterprises Market Listed Companies

GEM(Growth enterprise market) has been established for five years in China, which riched structure of China’s capital market and provided a good platform for financing and development for small and medium-size enterprise. But the research in China is mostly on the main board market insider trading. There is few research on GEM insider trading, and the research generally concentrated in insider holdings phenomena. So whether GEM insider is like the main board market insider, who can make the advantages of the information to obtain abnormal returns? Which corporate governance factors affects its trading profit and motivation? In this paper, we used the Shenzhen Stock Exchange GEM insider trading data,and made an empirical study on the GEM insider trading behavior.Firstly, we verify the timing ability and profitability of GEM insider trading from the short-term and long-term event window. The results show that GEM insiders selling can accurately grasp the future stock price movements and yield benefit; but buying does not have a significant timing ability and profitability.Secondly, we directly examines the relationship between GEM companies insider trading and valuation judgments, results forecasts these two types of information advantage. The results show that GEM insider selling mainly utilized valuation judgments information, they can get cash profits when the company was overvalued. While there is no close relationship between buying transactions and this two types of information advantage.Thirdly we examine the impact of corporate governance on insider trading profits and motivation. The results show that the impact on profitability is that the better various aspects of corporate governance, insider trading has lower profit. The impact on information transaction motivation is that reducing the proportion of state-controlled stake and largest shareholder, or improving directors、supervisors and managers’ salary can effectively reduce the degree of insider selling which is use information advantage. The relationships between buying information motivation and corporate governance is different with selling, which shows insiders may not make buying transaction in order to obtain benefits for themselves.Finally, we put forward the corresponding countermeasures and suggestions for the Commission and other regulatory authorities, GEM companies and outside investors.