Insider trading, internal capital market efficiency and SEO announcement returns — An empirical research on a-share market of China Shanghai stock exchanges

Abstract

This paper studies 3 relationship, first relationship is between insider trading profits and the efficiency of internal capital market, made conclusion that the insider trading profit which made by director, supervisor, senior and the staff and relatives can effectively improve the efficiency of internal capital market; secondly, empirical evidence shows that the internal capital market efficiency effectively alleviate the uncertainty of SEO announcement return, from two perspective: directional add-issuance and public security issuance market; finally, with the additional join of the concept of insider trading — insider trading scale which found it has positive impact on the efficiency of internal capital market, that the insider trading scale and internal capital market efficiency can effectively improve the SEO market return. Therefore, allowing appropriate insider trading profit stimulate the executives nostalgia for the position, leaving return as ability and cleverness “incentive mechanism” can effectively mobilize the enthusiasm of the management of the enterprise, has a positive impact on the SEO announcement return.