The Research Of Cross-shareholdings’ Stock Price Effects

Cross-shareholding is a normal method for the enterprise to make its capital operation,and expand its size. It has several positive and negative effects on national macro economyand enterprise micro economy. The company can practice cross-shareholdings strategies toachieve the joint and concentration of capital, and improve the efficient use of capital.However, if the cross-shareholdings is used by the company inappropriately, it will lead tosome problems such as insider’s control and the invasion of stakeholder rights, more worst,stock market bubble may be formed which will do harm to the healthy development of thereal economy. Especially after the outbreak of the Asian financial crisis, the long-termrecession of the Japanese economy and the global economic crisis caused by the U.S.sub-prime mortgage crisis, people started to reflect the cross-shareholdings.On the one hand, many experts and scholars at home and abroad claimed that the culpritbehind the bubble economy which produced at the end of the last century in Japan is causedby cross-shareholdings, they came to this conclusion by analyzing the cross-shareholdingssystem in Japan. On the other hand, many domestic experts and scholars generally agree thatthe cross-shareholdings play an important role in China’s2006stock market boom,particularly after2007when the new Financial accounting standards are implemented by thelisted companies and the company cross-shareholdings investment is measured under the fairvalue measurement. In June,2007, Shanghai Composite Index reached as high as6124.04,but then fell back all the way to lowest1664.92points on October28,2008. Thisphenomenon is caused by the boosting of cross-shareholdings in the share price rising channeland dropping in a downward spiral.Considering the above two points, the article selects the cross-shareholdings’ stock priceeffects measured under the fair value measurement as the object of the empirical analysis, thepurpose is to examine in Chinese listed companies, whether cross-shareholdings have thestable function to stock price after it is measured under fair value measurement in fiveyears.At the same time, according to the positive and negative effects of cross-shareholdingssystem, some policies and suggestions which improve our cross-shareholdings systembetween companies will be proposed. The main research work and study conclusion is:1. Sorting out and analyzing the theory and research status of fair value measurement ofcross-shareholdings from domestic and abroad, the author believed that the market lackseffectiveness, therefore, the equity valuations view model in the empirical accounting theorycan be used to test the efficiency of stock market and verify the relationships between thecross-shareholdings accounting information under the fair value measurement and the stockprice.At the same time, if the effectiveness of the market securities is guaranteed, theinformation concept can be applied to test that market information has the stock price effectsto cross-shareholdings.2. Based on the brief introduction of American and British cross-shareholdings practice,the analysis of the historical development of Japan and Germany cross-shareholdings, and thecomparative study of the four countries cross-shareholdings mode, it is found that the cross-shareholdings system is a recessive system arrangement, its formation, development andits function to the economic development are closely related to the social and historicalconditions at that time and the economic environment background. Although at the end of thelast century, cross-shareholdings in Japan and Germany present recession situation in differentdegrees, while the two countries present signs of reconstruction and adjustment before andafter the new century. The phenomenon shows that the existence of cross-shareholdingssystem arrangement is still rational.3. Having collected and analyzed the cross-shareholdings data of some A shares listedcompanies which belong to Shenzhen and Shanghai stock market in the year of2006-2010,we found that Chinese cross-shareholdings listed company possesses some natures, forexample, large quantity, lower holding ratio, investors particularly fund holdings are activeand characterized by significant regional and industry clustering. Meanwhile, the articleselected the typical case of the Chinese securities market cross-shareholdings to makeanalysis, the result revealed that the cross-shareholdings shares between companies presentedthe same relationship to the changes of "a prosperity, a loss for both sides".4. Using Feltham-Ohlson model based on the Valuation Model Perspective theory andstock price volatility concept based on the Information Perspective theory, the empiricalanalysis is conducted to prove the listed cross-shareholding-company’s value correlation andthe stock price effects problems. The results show that:(1)2006, the accounting standards areimplemented, accounting information provided by cross-shareholdings companies has thevalue correlation with share price, especially for the disclosure of fair value changes,cross-shareholdings equity under fair value measurement has more incremental informationcontent.(2) the share ratio, between the listed companies and the listed companies withinstitutional investors, has the negative correlation with fluctuations in stock prices, socross-shareholdings has certain stable effect to share price.5. Qualitative analysis of the market company cross-shareholdings and listed companycross-shareholdings measured at the fair value make positive and negative effects to economygrowth, the development of the industry, the capital market and the company itself. Providingthe basis to avoid the disadvantages of cross-shareholdings, and proposing the specificmeasures to improve cross-shareholdings system.6. Based on the quantitative and qualitative study, learn from the successful legislationexperience of cross-shareholdings in foreign countries. Considering the problems existed inthe cross-shareholdings regulation in our country, the concrete measures of improving thecross-shareholdings system and regulating public company cross-shareholdings behavior areput forward from four points such as company law, the securities law, securities regulatorsand related supporting system construction.