The Impact Of Lock-up Expiration And Management’s Action

Chinese private firms’ influence to the whole stock market is tremendous eitheron the whole market or on individual stock in the20thcentury. However, the actionprivate owned enterprises is opaque compared with state-owned enterprises, and nearthe end of lock-up stock price movement and normal trading day stock action mightbe a sign for their understanding of the company which brings out the topic.There are two parts of this issue. The first one is about the near the end oflock-up release day abnormal price movement, which reflect the market’s fearing ofpotential reduction and the related investors reducing their shares. Sample data forthis part are307companies from Jan.2009to Feb.2012, overcrossing one bullmarket and one bear market. The second one is related to normal trading timeabnormal return after accumulation or reduction of high executives of Chinese privatecompanies. There are290samples for analysis. The basic method that I use was eventstudy, where I calculated CAR for each event and the result shows that there areparticular price fluctuations around lock-up expiration which is different from goodand bad market because of different market fear. The first time of reduction will havethe most impact on stock price. Furthermore, I also conclude that there is differencein abnormal movements between industries and industries, which might relates to thecharacters of different industries.In trading time reduction analysis, we would not only consider company’sinternal factors as ROE, market size that previous researchers had pointed out, butalso other factors particularly in private companies such as the potential financialmanipulation or reduction by a holding company. In the analysis, we find that theexecutives’ action will have a large impact on share price. There is potential earningmanipulation before the share selling and family inner share transferring will have alarger impact than direct sales.