The Motivation Of Holding Reduction By The Largest Shareholder's Research In Chinese Shareholder Structure Reform

Chinese Shareholder Structure Reform is a unique problem in the development of China's capital market. The problem of non-tradable shares in listed companies distorts the pricing mechanism in the stock market, makes the corporate governance mechanism lack common interests and reduces the market's function of optimizing the allocation of resources. April 29,2005, the CSRC issued "the reform of listed companies'non-tradable shares related issues notice" and started the shareholder structure reform pilot. The concentration of restricted shares lifted in this reform, especially the large reduction by the large shareholders has made the stock market face unprecedented pressure. In this case, the study of the shareholders'reduction behavior, especially of the largest holders who occupy an important investment status, is conducive to dig out the problems of listed companies'governance, and also can be good guide on both policy and market developmentThis paper selected the largest shareholder of the listed company as the study object. Through model deriving,theoretical analysis and empirical study, we obtain the factors that may affect the reduction of largest shareholders to explore deep-seated reasons, and find out the problems in corporate governance so as to provide a theoretical basis and data support to improve corporate governance. Firstly, according to the different pattern of major shareholders'benefits under different ownership structure, we obtain the utility model of them with the assumption that they will maximize their own utility. With referencing the theory of insider behavior, such as the moral hazard theory, adverse selection theory and selection period theory, we derive a number of factors that may affect the holding reduction of major shareholders,this paper's assumptions and variables used in Empirical study. Then we select the listed companies in which the shares of the largest shareholders have all been in circulation before June 31,2008 as a sample to conduct empirical research. The results show that the purpose of major shareholders' reduction is adjusting their holding level to maximize their utility; The factors that effect this utility, what is also the reasons leading reduction are poor performance of the company,their high proportion of shares and the risk they undertake before the reform and the weak of the law of the minority investors'protection. The data also show that the optimal shares level of the non-state-owned listed companies'largest shareholder is between 30% and 35%, which also provides a further research direction.