| Summary: | 碩士 === 輔仁大學 === 金融與國際企業學系金融碩士班 === 99 === According to literature findings, insiders have information advantage of their company than outsider shareholders and they can use insider trading to earn excess returns.Therefore, insider trading will choose or lucky to sell stocks at high stock price. In words, insiders who selected good timing may release news before selling the stock, which implied an important news. Furthmore, when insider reported to sell stock, the timing of selling stock is worthy studying.
Insider trading data covers the period from 2000 to October 2010 and it includes 7678 observations.This study uses the cumulative abnormal returns over a period of 30 days prior the the announcement day, period of 3 to 23 days after the announcement day and period of 30 days before the announcement day to 23 days after that. Besides, our measures of corporate governance include institutional investors ,blockholders , pledge ratio,cash flow rights, voting-cash deviation, change of cash flow rights, member of controlling shareholders by insiders, positions held by insiders and controlling shareholders. Information disclosure contains of optimistic news, managerial overconfidence and decrement of quartly earning announcement.This study is going to know whether insiders choose timing to sell the stocks and earn excess returns. Then, we examine the impact of corporate governance on insider trading. Finally, this study discusses whether insider release news prior or behind to insider trading.
Our results show that insider trading trigger significant immediate market reaction of 4.43%. As the firms with poor performance or small size, they are more likely to choose higher stock price. More people report within three days and sell stocks when stock price is higher before announcement day. Moreover,we find that if pledge ratio is higher ,insider will choose timing to sell stocks in order to avoid to decrease of value of the collateral. When controlling shareholders have more cash flow rights, their interest converged with the firm, and insiders will not choose the timing.When voting-cash deviation is increase, insiders can earn returns by setting up nominal investment corporations in order to announce timing to sell stocks or increase the use of fund. And insiders increase their holdings before one month of announcement day, they will choose timing to sell. When insiders are the members of directors, supervisors or managers, they usually have more information about the firm’s prospects and easy to choose timing to make money via high selling ratio. Finally, insiders release optimistic news before announcement day. Managers with less overconfidences may lack confidence in the future, hence they will choose higher stock price to sell their stock and get better returns.Moreover insiders will delay decrement of quartly earning announcement for earning returns.
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