A Research Of The Relationship Between Control Benefits And Share-reduction Of Holding Shareholders

At the beginning of foundation of China's securities market, in case of losing the state-owned assets, we separate the shares of listed companies into two parts, exchange-trade shares and non-exchange-trade shares. Exchange-trade shares can be traded in securities market at a public price, somehow, non-exchange-trade shares can be traded in auction only on the condition of Securities Supervision Committee's approval. However, after nearly 20 year's practice, this kind of system show its serious defects that not only influence the development of securities market, but also cause a lot of problem in companies. On one hand, the securities market can't satisfy the requirements that stock price is decided by the market itself. And this would severely limit the securities markets becoming a more stable and mature capital markets. On the other hand, this phenomenon will affect the development of companies. Because stock price is not decided by market, but affect by some other factors, it cannot form an effective restrain and incentive to shareholders and managers.Because the bad affects, The State Council approved and promulgated a draft named "the Guidance of Stock-Liquidity Reform", that means the beginning of stock-liquidity reform. However, as the reform goes on, new problems shows up. Because the number of non-exchange-trade shares is as twice as the number of exchange-trade shares, when such a large number of shares can be traded in stock market without constrain, it gives investors a lot of pressure and also influences the whole stock market. As a result, the performance of individual stocks was very unstable, often largely declined. Under the special circumstance, More and more people are concerned about the issue of reduction of stocks of shareholders.However, holding shareholders as a special group of shareholders, their purpose of reducing stocks are more complex than other shareholders. As the actual controller of the company, holding shareholders have more benefits than other shareholders, its name is benefits of control. The benefit derived from the advantage of shareholding, holding shareholders can influence the decision-making of shareholders and Board of Directors, so that them can control the whole company. Benefit of control composes of private benefit and shared benefit, and them come from two different sources. If holding shareholders maintain its shareholding in the company, all of their benefits come from benefits of control. whereas, Stock-Liquidity Reform give them another way to gain benefit:reduction of stocks. Therefore, we start our study from the perspective of control benefits, finding the relationship between control benefits and the stock-reduction of holding shareholders.This paper reviews the theory of control benefits and analysis economic significance of stock-reduction of holding shareholders. On the basis of the above analysis, we construct a suitable indicator system and model in order to find the factors that affect the reduction of holding shareholders. Then, we collect 341 companies whose holding shareholders had reduced stocks as our samples during 2007 and 2010. Finally, conclusions comes out as following:The company's ownership structure, the nature of shares, performance, governance capacity have a significant affect on the stock-reduction of holding shareholders.At last, basis on the conclusions, we find that the number of stocks which reduced by holding shareholders is just a small part of the number of ex-non-exchange-trade shares. It shows the stability of the holding shareholder's investment and in the market, more reduction of stocks are from other shareholders. Therefore, the impact of reduction of holding shareholders on the capital market is not as big investors thought. And we can see the positive part of holding shareholder's reduction:them can ease the situation of excessive concentration of shares. Therefore, investors should be more rational and objective on the problem of the reduction of holding shareholders. This paper also proposed company should increase the proportion of manager's shareholding. It can drive the managers making a long-term planning about the company.