Manipulation And Large Shareholders' Holding Reduction

As Non-tradable shares gradually lifted, big shareholders'reduction became the focus of attention. In this paper,based on the theory of Aggarwal and Wu (2006), we study the return and turnover of the listed company's stock that big shareholders reduced through the event study, in order to find the possibility of price manipulation from the perspective of information asymmetry and big shareholders integrity.Information asymmetry is a precondition of the stock manipulation. The study found that dishonest insider stock manipulation through the release of false information, honest insider create opportunity through the release of true information. In 2007, the study found, only 7.5% of the samples exist stock manipulation. But one-third of the big shareholders create the condition of reduction through the release of the good news. We also found that, under the condition of information asymmetry, no matter whether the big shareholders honest, manipulation activities does not exist or is not successful. But we have reason to believe that the proportion of price manipulation should be far greater than 7.5% through the further study on the interval of reduction. Therefore, regulating information disclosure, improve the transparency of information is effective to make market manipulation impossible.The contribution of this paper is not only to untie the mystery that big shareholders have behavior of price manipulation under the background of the reduction, but also find the existing condition of the stock manipulation activities under the background of the reduction. Therefore this study extends research in manipulation, and provides suggestions to supervisors in establish effective capital market.