Which, in addition to the regulatory authorities to monitor the use of legal regulations and penalties in addition. Level of corporate governance research how to prevent insider trading is a very interesting article on corporate governance perspective, on the basis of previous research, for the stock market insider trading and corporate governance status quo. Proposed for the prevention and avoidance of insider trading policies and proposals.
insider trading of corporate governance
insider trading refers to the insiders and inside information by improper means to acquire other persons violating the law, disclosure of inside information, according to inside information proposed sale or trading of the securities act of another person. Insider trading seriously affected the market efficiency and resource allocation, contrary to the securities market At the national level, apart from legislation and regulation, corporate governance from the perspective of the causes of insider trading, fundamental for prevention of insider trading.
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literature review of non-informed outsiders, the insider transactions convey some information, the management of the company's future prospects may be some belief, the company may be governance information. Therefore, many scholars from the perspective of corporate governance, insider trading was studied. Some scholars believe that some kind of passing insider trading and corporate governance-related information. Kerr (1980) and RozefandZaman (1988) that insider trading conveys new information, outside investors to adjust investment strategies should be followed. HirscheyandZaima (1989) that insider trading before the stock fell to pass some kind of message. AllenandRamanan (1995) found that insider trading and earnings are not expected to interact and jointly decided to stock returns, the message that insider trading is not fully included in the surplus. BoehmerandNetter (1997) to insider trading as a management attitude of imminent takeovers alternative variables. EderingtonandGoh (2001) studied the conversion of convertible bonds before the enforce insider trading, insider trading if a significant buying behavior, suggesting that the conversion of convertible bonds is not bad news. Fidrmucetal (2006) study market reaction to UK insider transactions and found that outside directors and shareholders of the excess return of equity share of the impact, the director of trading based on information released before the adjustment is very important.
all levels of corporate governance, including governance, and some scholars, it is from the perspective of corporate governance, insider trading. These perspectives, including: R & D and insider trading, the degree of democracy and corporate insider trading, insider trading, measurement and corporate governance, insider trading data and corporate governance, insider trading legislation and corporate governance. AboodyandLev (2000) that insider trading R & D is a potential source of income. By analyzing the 1985-1997 data found that insider trading, R & D focused enterprise R & D than companies without insider trading income significantly. Meanwhile, the insiders take advantage of the R & D budget of the insider information to trade. Therefore, R & D is the information asymmetry and insider trading proceeds of a contributing factor, related to management compensation, incentives and other aspects of disclosure policy.
JuliaWu (2004) analysis of the corporate governance index and insider trading activity and market prices reflect the relationship between the use of paper Gompersetal (2003) Construction of anti-takeover-based corporate governance index, the shareholders and management agency relationship is based on checks and balances will be classified as a democratic enterprise businesses (large shareholder rights) and authoritarian enterprises (greater management authority). Study found that democratic enterprise, the density of insider trading, the market reacted strongly, causes and management of insider trading as compensation-related benefits. Wu result of the corporate governance of the external receiver (acquisition) and internal control (monitoring) the relationship between the two ideas are related, there is no substitute relationship. Two sets of business transactions through the timing of the discovery, based on more authoritarian enterprise market timing transactions, and democratic enterprises rely more on inside information.
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CrucesandKawamura (2005) probability of informed traders use ITPs ( in-formedtradingprobabilities) as a measure of insider trading, the Latin American countries in the ITPs of the heterogeneity found in the announcement before, ITPs significantly increased, ITPs negative correlation with Tobin's Q. Of corporate governance that the ITPs as an alternative to the variable quality of the heterogeneity produced by the market acceptance and pricing. Grishchenkoeta1 (2006) tried to extract transaction data from the head of corporate governance and effective information. In LMSW (2002) theoretical framework of the emerging markets the previous day's trading volume and revenue between the first order autocorrelation was found along with a large volume the continuity of income, indicating the existence of insider trading in emerging markets. In addition, investor protection is better and more complete disclosure of insider trading in small stocks, that trading volume and return autocorrelation contains useful information on corporate governance. Domestic scholars Guyong Li (2003) in his doctoral thesis that legislative restrictions on insider dealing can be adjusted between shareholders and management interests, the formation of different corporate governance structure, and thus affect performance.
from the above literature review, the majority of scholars believe that insider trading and corporate governance related. Perspective from the insider trading of corporate governance can act from a micro level, depth of understanding of insider trading, and ultimately achieving the purpose of preventing insider trading occurred.
Second, insider trading and corporate governance of the status of
view of the frequency of insider trading in China's situation is grim in 1999, trade practices Among them, the Two types of insider trading based on the identification of the main body, once these two types of sensitive information in insider trading during the relevant securities or related securities trading recommendations to others, or disclose the information, will be identified as insider trading. Despite stringent insider trading legislation, but the insider trading cases have occurred from time to time, from 1996-2007, China's insider trading investigation by the Commission a total of 44 cases from.
the status of corporate governance in China is also facing many problems. China's current governance structure of listed companies can be summarized as the major shareholder and insider control super-power mixed-mode, and thus spawned a number of problems. ~ Is a listed company lacks the balance of powers formed the basis of property rights, ownership structure is irrational, the controlling shareholder stake is too large. Second, the Board of structural imbalance, Third, the company authority to set reasonable, the lack of company Fourth, the lack of incentive constraints with the market mechanism, directors and senior management is the lack of reasonable and effective incentives, lack of strict regulation constraints. Five is not conducive to the formation of the external environment, corporate governance, external governance environment, the company can not effectively play a role. Sixth, corporate governance, legal environment needs improvement.
Overall, insider trading and corporate governance in China The Current Situation, needs to be further improved. First, from the business point of view, insider trading seriously undermined the interests of small investors on corporate governance challenge. Such as corporate governance should be how can we avoid the negative effects of insider trading and what companies are more likely to breed insider trading. Second, from the perspective of small investors, on the one hand, due to inside information not known to outside investors, then, outside investors can speculate by the status of corporate governance, companies may place the probability of insider trading in order to avoid losses; other On the one hand, when the corporate governance information is difficult to be monitored, whether the information can be judged by insider trading status of corporate governance or governance crisis, have yet to be discussed.
Third, from the Perspective of corporate governance, insider trading status
statistics for the 44 cases of illegal insider trading of the cases, mainly in accordance with the message type, transaction subject, place and year of Industry classification and found the existence of insider trading and corporate governance are closely linked
message type from the point of view, insider information is a major enterprise level information, 84% of profit sharing and stock purchase class event. This information comes from the daily decisions of corporate governance, from the Board of Directors proposed to the shareholders of the General Assembly adopted plan, corporate governance around the company's major decisions and events, these major decisions and events for all the enterprise's internal and profit sharing or equity participation in the acquisition of interests stakeholders know. If the information disclosure or human use, unavoidable insider trading.
subject from the trading point of view, the subject of insider trading is the soul of corporate governance. Takamiya, large shareholders and the company itself accounted for 55%, securities companies, fund companies and trusts accounted for 23% of the acquirer and the parent company held 21%. Direct involvement of executives and major shareholders that the internal governance of corporate governance, equity incentives to provide the material basis for insider trading, convenient and efficient channels of information to provide illegal insider trading conditions, to provide high returns for insider trading unlawful motive. Acquirer, the parent company, financial intermediaries in external corporate governance, with business contacts, have access to insider information, the excess return of the inducement,UGG boots, the existence of illegal insider trading motives.
year from the occurrence point of view, more than 77% of cases of insider trading occurred in 2001 and before, more than 50% occurred in 1998 and before, that the external legal and corporate governance environment. Before 1999, China has a
Industry from the point of view, insider trading, 39% came from manufacturing, 11% from information technology, manufacturing and information technology industry has its own characteristics,UGG shoes, that is, the higher R & D investment. Higher R & D investment in manufacturing and information technology industry faces a high possibility of insider trading, because the high-tech enterprises are facing a major decision is more subtle and more difficult cognitive, together with P-& D investment is not comparable with the industry, it has the exclusive on their own, R & D investment can not be carried out in the open market price, and only listed in the financial statements, the decision is not known to outside investors and understanding of informed traders is to seize such opportunities for insider transaction.
This shows that insider trading is not simply the stock market irregularities, has a corporate governance mechanism behind the present. Whether the enterprise's internal governance within or external stakeholder management; both rely on Corporate Governance in the external legal environment, or higher R & D investment in industry specific background,UGG boots cheap, once the bad governance can easily lead to insider trading , to the serious consequences for companies and investors.
four, from corporate governance measures to prevent insider trading
Based on the above analysis, insider trading and corporate governance at all levels closely. To prevent insider trading, the need to fundamentally strengthen corporate governance.
1, to strengthen self-discipline within the people, improving their internal governance. Internal governance structure is the basis of governance, including controlling shareholders, board of directors, supervisors, managers and other corporate governance at all levels. Corporate governance within the enterprise are an important subject, the entire process involved in corporate governance in some major news to announce before the enterprise, or the appropriate board of directors and shareholders held during the General Assembly, easy to breed insider trading. To this end, on the one hand, people need strict internal discipline, a profound understanding of the many hazards caused by insider trading; the other hand, requires the company through appropriate incentives and penalties to prevent insider trading of their motives.
2, strengthen the external governance. Various stakeholders within the enterprise inevitable human contact, and participate in some of corporate governance, and thus learned that the company's insider information, should the laissez-faire, there are more people with outside chances, the use of insider information to outsiders will increase the possibility of trading, and ultimately will lose the interest of companies and investors. Therefore, its stakeholders, joint enterprise, mutual supervision, to develop effective reward system, to prevent insider trading and other conduct prejudicial to the interests of the company.
3, and optimize enterprise information disclosure system. In an efficient capital market, information is critical. When the market is weakly efficient, the stock price contains all the information has been published. At this time, if people use their position within the relationship between insider information and transactions that will interfere with the pricing of the securities market functions, and ultimately through the price adjustment and volatility of the company's market value. In this regard, one of the best strategy companies optimize their information disclosure system, so that before the publication of insider information strictly confidential, and as soon as they become public information, so that we can achieve an effective prevention of insider trading purposes.
4, improve the legal environment of corporate governance, effective protection of the interests of small investors. In recent years, corporate governance laws and regulations or amendments to be launched, but the deterrence of insider trading is still insufficient, and thus can not be very effective in protecting investors, especially small and medium investors. In order to prevent insider trading, protection of the interests of small investors, two aspects need to improve the external legal environment. First introduced special legislation. Such as specialized anti-insider trading laws, from the insider trading laws to regulate the identification, identification and punishment, so as to achieve the purpose of improving corporate governance. Second is to strengthen law enforcement. Such as increased monitoring of insider trading, investigation and evidence collection and punitive, not only to be severely insider traders administrative and criminal penalties, but also increase the economic punishment, not only can not allow illegal workers to obtain any economic gains, but also the former through the economic sanctions against the law of their financial ability to lose again.
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