The Help Hand Of Major Shareholders And Its Economic Consequences During The Reform Of Split Shares

It is the fact that the traded shares coexists with the non-traded shares at the beginning of the establishment of stock market in China.And the misallocation of economic resources comes from the coexistence.In 2006,Chinese government launched the share split in order to overcome the harm of the problem of the same share with different rights.As planned by the Securities and Exchange Commission(SEC),most of all the listed companies have already meet the goal that all shares of list firms can be traded on the capital market.With the revolution of the share split movement,this paper based on the principle-agent theory aims to investigate the opportunistic action of support,such as cash injection or assets transaction from the controlled shareholders and its economic consequences.Specifically,I put forward the question of how the difference of the characteristics of support from the controlled shareholders during pre and post of the share split,and what the consequences of the support from the controlled shareholder.I find that the more listed firms the large shareholders own the more support for their owned listed firms;the market seems to see through the phenomenon of the support and tunneling from the large shareholders.Meanwhile,I investigated the short and long term curriculum abnormal return(CAR)and operating performance of the assets transaction between large shareholders during 1998-2010 and find that the long term operating performance,such as EPS or CFS,after the assets injection by the large shareholders has been improved significantly,but the CAR before and after the announcement day of the assets injection is not significant.Similarly,considering the incentive of meet the qualification for SEO,the ROA,EPS and CFS has been significantly improved during the pre and post stock-split,but the market performance has no difference at all.Using 216 cases of the increase in shareholding of the large shareholder during pre and post of the stock split in Chinese stock market,I find that in a short term,there is significantly positive market reaction on the increase in shareholding of the large shareholder,but in the long run,there is no significant market reaction.At the same time,the market reaction in the increase in shareholding is free from the process of the stock-split and the ratio of controlled shareholders.At last,I focus on the related-party transactions(RPT)between the shareholders.I find that(1)the RPT do harm to the firm value;(2)there is no change in the effect of the behavior of the large shareholder on the firm value after the stock-split;(3)there is the increasing support from the large shareholders and the behavior of the large shareholders has significantly changed after the stock-split.