Institutional Investors' Site Visit?Internal Control And Insider Trading

With the implementation of new Securities Act and new Company Law in 2006,insiders of listed companies(like directors,supervisors,senior managers in company and major shareholders holding a certain proportion of shares)are allowed to legally buy and sell their company's stocks on the secondary market.At the same time,relevant regulatory authorities require company insiders to timely disclose trading information in accordance with regulations when conducting stock trading,and further improve the information disclosure system of listed companies in China's securities market through a series of laws and regulations such as limiting short-swing trading and setting up sensitive trading periods for insiders.Opening insider stock trading can enhance the activity of China's capital market and the circulatory of company stock to a certain extent.Compared with external investors,insiders have certain information advantages due to their own management power.And they have more comprehensive and timely information about the company's future development plan,the relationship between the company and its customers or suppliers,and the difficulties the company may face,thus,there is some information asymmetry between insiders and external investors.However,Outsiders have very limited access to internal information,and insiders may obtain excess returns relying on their information advantages.Although China's regulatory authorities have established relatively complete laws and regulations for insider trading,can insider trading make use of its information advantages to obtain excess returns under the background of China's current economic system? What factors can influence insider trading excess returns? What role will the corporate governance mechanism of China's capital market,especially internal control and investor research play in insider trading? These issues are important and controversial,so they become the focus of this paper.This paper takes insider trading data from 2014 to 2017 disclosed by Shenzhen Stock Exchange as the sample.By taking short-term and long-term excess returns of insider trading as the starting point,we studied the effects of the quality of internal control of listed companies and the number of investor surveys on the ability to obtain excess earnings from insider trading,based on the company's internal management and external management two perspective.Moreover,this paper further studies the impact of institutional investor research on insider trading excess returns for companies with different levels of internal control quality.The main conclusions are as follows:(1)There is a significant negative correlation between investor research and insider trading excess returns.(2)There is a significant negative correlation between the quality of internal control and insider trading returns.(3)For companies with different internal control quality,the effect of investor research times oninsider trading excess returns is different.In the companies with poor internal control quality,the inhibiting effect of investor research on the excess earnings of insider trading is more obvious.