A Study On Release And Reduction Of IPO Restricted Stock

Since the listing,GEM board and SMP board have been favored among investors owing to the strength of strong growth,small capital and high yields.However,the hidden dangers of GEM board and SMP board arouse wide concern either,which includes:high PE,assault stakes of particular investors,over-raised fund,frequent resignations of executives and incomplete delisting system.Among these dangers,the bloated share prices supported by the high PE,which gets out of the company practical development prospects,is unsustainable and this will to some extent drive the VC institutions,shareholders,directors,supervisors and executives to perform intense desires to cash out after IPO restricted stock lockup expiration.Meanwhile,when analyzing the current situation of Restricted Stock Lockup Expiration,the major findings of this study as follows:(1)IPO Restricted Stock is the main type of Restricted Stock Lockup Expiration for the moment,not only occupies a dominated position on release number,but also remains high level on ratio of listing market value;(2)The releasing event always happen on GEM board and SMP board in recent years;(3)GEM board and SMP board are main objects for inventors to sell down their stakes and these two boards take high proportion among reduction per month.Based on these above,this paper selected IPO Restricted Stock of GEM board and SMP board in the last few years as samples to systematically and deeply study three aspects:the market response and the determinants of Insider IPO Restricted Stock Lockup Expiration,the IPO Restricted Stock Reduction,the market response and the determinants after the reduction of IPO Restricted Stock.This paper adopted Holistic approach and Taxonomic study,empirically analyzing events of IPO Restricted Stock Reduction on GEM board and SMP board of China capital market.First of all,from Nov.2010 to Dec.2011,there are 1684 IPO Restricted Stock Lockup Expiration events(566 events from SMP,1118 events from GEM)derived from 573 listed companies(237 companies from SMP,346 from GEM)taken as study samples,this paper study the market response and the determinants of IPO Restricted Stock through empirical analysis.Secondly,based on 1684 events above,this study selected 1366 events of IPO Restricted Stock Reduction(566 events from SMP,797 from GEM)came from 382 listed companies(142 companies from SMP,240 from GEM)as research samples,empirically analyzing the determinants of reduction behavior and proportion by employing the Logistic Regression,Multivariate Linear Regression and Test of Difference research methods.Finally,taking 846 events of reduction(329 from SMP,517 from GEM)from 382 listed companies(142 from SMP,240 from GEM)as research samples,this study empirically analyze the market response and the influence factors after IPO Restricted Stock Reduction.Through the part of empirical study,the following conclusions are derived:First,from the view that the empirical analysis of the market response and the determinants of Insider IPO Restricted Stock Lockup Expiration,these releasing events contain apparent information on the whole view,and it can have a significant negative impact on stock price in short term.But on the view of subsample,this conclusion only works through the GEM board’s IPO Restricted Stock Lockup Expiration.At the same time,this study tested CAAR by different window periods and subsamples,though the influence factors on market response are not consistent among different window periods,generally speaking,the effect of release size,proportion,amount of shareholders released,extent to profit of selling shareholders on market response still presents.Second,from the view that the empirical analysis of influence factors on IPO Restricted Stock Reduction,six variables are crucial determinants of IPO Restricted Stock Reduction,which are market circumstances,extent to profit,shareholding ratio,ownership concentration,ROE and growth in the main business.Overall,the main influence factors on reduction behavior and proportion are basically consistent,only few individual variables are different.In the meanwhile,the influence factors between GEM board and SMP board’s reduction behavior and proportion exist significant difference,that is,the probability of GEM board’s IPO Restricted Stock Reduction behavior is much higher than SMP board’s listed companies,and the proportion of reduction behavior in GEM board is significantly higher than SMP board as well.Moreover,the reasons for differences were analyzed as follow:market and enterprises’operating situation are main factors contributing to difference of IPO Restricted Stock reduction behavior between GEM board and SMP board,and the shareholders as well as enterprises’ operating situation factors caused the difference of IPO Restricted Stock Reduction proportion.Third,from the view that the empirical analysis of market effect and influence factors on IPO Restricted Stock reduction,generally speaking,the IPO Restricted Stock reduction events convey obvious information,which has significant negative effect on share price.Whereas,from the point of subsamples,such conclusion only can be applied to GEM board’s market response of reduction.Through the empirical analysis of short-term market response after reduction,the variables of reduction proportion,reduction duration,and amount of shareholders have significant impact on short-term market response,but the time difference between releases and reduction,as well as reducing ways were not supported by short-term market response.Apart from the time difference between releases and reduction,reduction proportion,reduction duration,amount of shareholders and reduction ways have noticeable influence on long-term market response.Furthermore,Interaction model tells us that the interaction effect between the two variables of reduction proportion and amount of shareholders and plate’s type are significant in short-term market response,while in long-term market response,the interaction effect between the two variables of amount of shareholders and reduction type and plate’s type are striking.This study has important meaning for theory and practice,on the one hand,research of restricted stock lockup expiration,which starts from the micro perspective,focus more attention on listed companies releasing events’ influence on share price volatility,the existing literatures only be confined to analyze and understand the influence process of listed companies release by vertical level.Therefore,this study separated SME board from the main board,and compared SME and GEM through cross-sectional research so as to improve and enrich the Restricted Stock Lockup Expiration study field.On the other side,this paper also analyzed the market response before and after the Restricted Stock lockup expiration by Group Study,not only analyzed the listed companies general market effect,but also research on in the case of grouping,how related factors influence the direction and force of market response,answering the question widespread concerned by investors that whether the Restricted Stock circulation is the possibility and reason contributing to stock price falls.The conclusion of this study is more targeted and relevant suggestion given on this paper is more suitable for protection of medium and small investors,and it also provides references for regulators to develop policies of restricted stock lockup expiration,so as to set policies which are favorable for capital market development.