Large Shareholder's Behaviors' Short-Term Impact On Chinese Stock Price: Empirical Analysis

Since Chinese ownership de-settlement transformation started, a large amount of unexchangeable shares have been transformed into exchangeable shares. It is allowed for the state shareholders and institutional shareholders to exchange their shares in the secondary market. And this makes the study on large shareholder's behavior more and more meaningful. Foreign studies showed that large shareholders always gained abnormal return with their asymmetric information advantages. So as a reference, behaviors of large shareholder can provide some guidance to investors on stock investing. Recent years, Chinese scholars have started to pay attention to the problems of holdings of shareholder and ownership structure. But the studies which focus on market effectives of share holdings increasing are still not that much.This literature concentrates on shares increasing of large shareholder's short-term effectives. In 2008, suffered from impact of global financial crisis, stock market of China started to decrease sharply, in the mean while, the boom share holdings of large shareholders were coming. It turned out a lot of relative studies focused on this unique period. As the market started to recover gradually, large shareholders didn't stop increasing their share holdings. This paper concentrates on the period after crisis, taking this steady period as time sample. During this period, share holdings increasing issues have been decreased. There were sixty companies' shares being increased in all. We picked forty-four of these sixty companies as study sample by getting rid of the ones which being increased shares repeatedly, lack of financial datum, suspended for a long term. Notice that our study focuses on short-term impact. In this paper, we, combining of the signaling theory and market timing theory, made some assumptions. Assumption 1, large shareholder increasing share holdings can make investor gain short-term abnormal return. Assumption 2, abnormal return will exist before one or two trading days. Assumption 3, this increasing share holding effective is positive related to first shareholder's share holding proportion. Assumption 4, increasing share holding effective is positive related to increase ratio. Assumption 5, increasing share holding effective is positive related to both cash flow per share and cash flow growth rate. Assumption 6, is negtive related to MKTBKASS. There are two parts included in the empirical study. In the first part, it tested the short-term effect of large shareholder increase share holdings issue by the event study method. And it turned out that taking this major shareholder increasing share holdings issue as a reference, investors could gain a significant abnormal return. In the second part, based on the consequence from part one, it took the cumulated average abnormal return from one day before to one day after the notice day as explained variable, set up multiple regression model to analyze the factors which had significant impact on cumulate average abnormal return. In this process, we got rid of multicollinearity, autocorrelation and heteroskedasticity problems. In the meanwhile, empirical research results showed that significant abnormal return had started to exist one or two days before notice day. So it is believed that on some certain level, inside information leaks problem maybe exist in China capital market. In the conclusion, CAAR is negative related to increasing ratio, which is opposite to our assumption 4 and some foreign studies. As to this point, although we gave some probable reasons, we didn't provide much good theory support.In China, studies on the relations between major shareholder's increasing behavior and stock price changing are not that much. While laws and regulations are getting more and more complete, the limits on major shareholder's behavior in the secondary market are getting less and less. So it makes much more sense that we should study on major shareholder's behavior. There are also a lot of disadvantages in this paper, such as the increasing issues during this period were much less than that during the recession period. And the purposes of increasing behavior may differ from each other, but we didn't deal with them separately. So the coming researches could expand from this point.