An Empirical Research On Reduction Of Restriction-Lifted Shares Of Non-Ccirculating Stockholders By Block Trading System

Since the reform of share structure in 2005, the lifting and reduction of restricted shares has always been the close attention of all parties. In order to alleviate part of the pressure of restricted shares, the SFC issued the regulation"Guidance to the transfer and sales of restriction lifted stocks of listed companies"on April 20, 2008. This regulation made the block trading system a new channel of reduction of restricted shares, made the deserted block trading system become active again, and also to some extent, alleviated the impact of the lifting of the restricted shares on the secondary market.Due to the large trading volume and other characteristics of the block trading system, particularly the special background of the restricted shareholders, we believe that the block trading data of the restricted shareholders has contained much information. We also believe that different types of the restricted shareholders have different motivations of reduction, and the transaction data based on the different motivation (including typical tax avoidance motives and cash need by selling at a high value level) also have different information.From different motivations of restriction lifted stocks'reduction of restricted shareholders, we try to analyze the differences of the different behavior patterns driven by different motivations, as well as the impact on market price changes on the secondary market and investment decisions. To study the reduction of the restricted shareholders in the block trading system, we can help investors to better judge the future price movements of relevant companies, thereby helping their investment decisions and providing the corresponding recommendations.With the Probit model, we made an empirical analysis on restriction lifted stocks'reduction of restricted shareholders by the block trading platform. The conclusion is as follows: the restricted shareholders did have the insiders'advantage, that is when they knew the current earnings of the company will deteriorate, they would like to selling the stocks through the block trading system; when the stock value of the company was overvalued, they tend to sell the stocks; solvency of the companies had no influence on the decision-making of restricted shareholders; due to the adjustment of tax policy, personal shareholders would choose to selling stocks at a lower price level in order to avoid tax consciously.For the impact on the main market after reduction, our studies shown that the market itself could effectively distinguish the reduction under different motives and react accordingly: for cash motivation by selling at a high value level, if the company had a higher price-earnings ratio, the market will follow the reduction of restricted shareholders, i.e. sell shares, makes the cumulative average abnormal returns (CAR) lower; for the tax avoidance motive, because it didn't not reflect the financial conditions of companies, thus the market would not react to it, and the reduction had no significant impact on the CAR, either, etc.