Insider Trading Indian Business Organizations

Prof. Anil Kumar Singh; Prof. Anurag Singh

doi:https://doi.org/10.51768/dbr.v17i2.172201604

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Insider Trading Indian Business Organizations

Anil Kumar Singh, Anurag Singh

https://doi.org/10.51768/dbr.v17i2.172201604

Published Online: November 30, 2016

Author Details ( * ) denotes Corresponding author

1. * Anil Kumar Singh, Associate Professor, Sri Aurobindo College (E), University of Delhi, Delhi, India (dranil.singh@gmail.com)

2. Anurag Singh, Associate Professor, Jaipuria Institute of Management, Noida, Uttar Pradesh, India

Purpose: There is little research on the insider trading due to organic and inorganic growth of the organizations taking place across the globe. This paper is attempted to study the amount of

special knowledge insider posses as well as people might earn from special knowledge at the time of merger and the intermediaries involved. Although it is difficult to blame any individual or organization on the charges of insider trading in the absence of legal judgment. This paper is an attempt to position India with regard to insider trading in a global environment. The paper had attempted to explain the role of Securities and Exchange Board of India (SEBI), Securities Appellate Tribunal (SAT) and High Courts and Competition Commission of India (CCI) during the merger process of two big Pharmaceutical Indian Business organization and reason for abnormal gains in a flat market and possibility of insider trading.

Design/Methodology/Approach: This study is conducted to identify the factors responsible for rise in prices of shares of companies before and after the announcement of merger of listed Parma Company with another Nifty Parma company. The focus of this study is to establish the relationship for rise in prices of shares of companies before and after the announcement of merger of top listed Parma Company with another Nifty company. The data used in this study is of health care CNX Pharmacy as independent variable and Company involved in the merger over the period (-10+10) from the date of event by using event based regression method. The attempt of this study is to identify the basis of trading that took place near the event of merger.

Findings: There are abnormal returns associated with the announcement of pharmacy merger in India. The returns are to the tune of 387 % in Company B and approximately 58% for Company A. The abnormal gains in flat market give rise to suspicion that insider trading might be reason for such abnormal gains due to merger of Two Indian Business Organizations.

Research Limitations/Implications: This study has no meaning in the absence of regularity mechanism. Indian legal system took action against small companies and broker such as Harshad Mehta, who died in jail or Ketan Pareek, another broker. The SEBI has not taken any legal action against any big corporate on the charge of insider trading in India. On the other side USA has taken lot of step in this direction and provided leadership on insider trading.

Practical Implications: This study is one of the few systematic empirical researches in the scientific paradigm, being carried out on insider trading in India. There are few research works on insider trading and literature on insider trading is limited. This study is a modest attempt to create awareness on this issue.

Keywords

Insider Trading, SEBI.

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