Disposition Effect, Reduction Behavior Of Major Shareholders And The Economic Consequences

After the completion of the share-trading reform, China’s securities market enteredinto a total current era. And then the reduction of large shareholders became the theoryand practice research hot topic. The behavior of large shareholders brought hugeinfluence to China’s securities market. The stock market remained in the doldrumsbecause of the serious oversupply problems, and the efficiency of capital marketreduced. This is a problem we face to be solved at present. So, the article took212listed companies which had the reduction behavior of large shareholders in2007to2010as the research object. With the empirical research, the article examined the causeof large shareholders’ reduction behavior and the economic consequences of the largeshareholders’ behavior. Besides, the article researched the correlation between the largeshareholders and the analysts in the process of reduction, too.First, the article described the large shareholders’ reduction status and theeconomic consequences, and put forward problems and research direction; thensummarized the internal and external literature about the topic of the large shareholders’reduction; after that, derived the motivation and economic consequences of largeshareholders’ reduction behavior from the previous research results and the realeconomic phenomenon. In this process, the article added the theoretical analysis aboutthe correlation between the large shareholders and the analysts. According to the theory,this paper conducted empirical analysis; finally draw the conclusion, and put forwardthe policy Suggestions.Through the research we found that: there was a positive correlation betweendisposition effect and the reduction ratio of the large shareholders. That was to saydisposition effect promoted the reduction behavior of large shareholder, it was themotivation of major shareholder’s reduction behavior. However, the threat from thetransfer of control right inhibited the majority shareholder’s reduction behavior, andweakened the influence of disposition effect. There was a significant negativecorrelation between the reduction ratio and the market investors’ CAR. The reductionratio was lager, the CAR would be smaller. This suggested that the reduction behaviorof the big shareholder caused a negative wealth effect, delivered the enterprise negativeinformation to investors. Moreover, in the process of the large shareholders’ reduction, the analyst’s rating added fuel to the fire, analysts and shareholders may have interactionbehavior.The research of this paper enriches the existing research literature, provides acertain theoretical reference value to policy makers and regulators.