The Research On Application Of Warrants Involving In Non-liquidity Shares' Transfer

Stock right separation is one of the most important distinguishing features in the present capital market of China. Stock right separation, as a problem left over by history, perturbs the expected stability of the capital market, lessens the common interests of Corporate Governance, and is adverse to deepen the reform of the Management of State-owned Assets. Therefore, it now becomes a substantial obstacle on the way of the systematic completion of the capital market. A solution of this problem is urgently needed. Although numerous solutions have been proposed, most of them fall into two major categories: the expansion of aggregate stocks and the structural adjustment. Since the expansion of aggregate stocks cannot dissolve the existing non-liquidity shares and hence cannot solve the problem of Stock right separation, non-liquidity shares' transfer is regarded as the most effective proposals. However, what happened in recent years shows that it is very difficult to carry out direct transfer of non-liquidity shares.Warrants, as one of the new popular derivative instruments, refer to securities giving the holder a right to subscribe to a share or a bond at a given price and from a certain date. The research in this thesis shows that, introducing warrants while transfer non-liquidity shares can insure the complete of the transfer, reduce the transfer price, and improve the efficiency of the capital market.This thesis describes the circulations of Stock Right Separation and the projects to solve the problem at first. Then we introduce the basic characters and usages of warrants, including all kinds of theories about it both abroad and domestic; build models to analysis the difficulties will be faced if transfer direct. The results indicate that transfer direct is hard to be executed because of many obstacles, such as the impossibility to determine the transfer price and rate, the wealth transference from the liquidity shares' holders to non-liquidity shares' holders, the smashing of stock price during the transfer, and the adverse selection of the companies. Those clogs make thetransfer directly useless, so it is an emergency to use derivatives in solving this problem.Based on the balks in former, warrants are encouraged to publish during the processes of transfer. The study in this thesis proves that introducing warrants can ameliorate the whole process and take a lot advantages.