Abstract: Previous literature suggests that under the pre disclosure system, insiders can obtain excess returns by reducing their holdings. However, there are few studies that explore how to curb opportunistic holdings by insiders from the perspective of the waiting period of the pre disclosure system. From the perspective of the waiting period of the pre disclosure system, this paper studies the impact of extending the waiting period on insider reduction behavior. The findings show that extending the waiting period can suppress opportunistic behavior of insiders who quickly reduce their holdings. Specifically, extending the waiting period can suppress the tendency of insiders to quickly reduce their holdings after the waiting period ends and reduce the benefits of such rapid reductions. The mechanism analysis shows that extending the waiting period can weaken the advantage of insiders in utilizing short-term private information and reduce the degree of information asymmetry during the waiting period. However, further analysis reveals that after extending the waiting period, insiders may gain more benefits from non rapid reduction of holdings, indicating that insiders may engage in opportunistic behavior of obtaining the right to reduce holdings in advance and waiting for trading opportunities. To this end, it is necessary to revise the pre disclosure system for insider reduction, appropriately extend the waiting period for insider reduction plans, and weaken the autonomy of insiders in implementing reduction plans.

Key words: insider trading, prior disclosure, waiting period, rapid reduction, trading strategy