Stock Price Evaluation Model Under The Full Circulation In China’s Listed Company

Before China securities regulatory commission began the reform of non-tradable shares of China’s capital market in 2005, it has been in the state of equity division. Legal person shares may not directly circulation in the secondary market, in order to keep the public ownership status; it also has brought China’s capital markets many problems. Capital market financing function and market pricing function failure. China’s capital market is investment markets in speculative market, small shareholder invested irrational; it was difficult to study Chinese stock price valuation. In order to eliminate the defects of China’s capital market, on April 29,2005, the China securities regulatory commission released“the notice of the listed company pilot separation reform projects”. It started pilot separation reform projects. After 4 months the pilot work successfully completed, in September,2005, the full implementation of the reform of non-tradable shares started.From reform of non-tradable shares, non-tradable shares in the secondary markets can’t start in succession to the circulation of stock suspension, In 2005, the proportion of total equity non-tradable shares lifted,7.4%, in the end of 2011, China’s A-share market basically can achieve all-round circulation.Full circulation of Chinese capital market listed companies including present out of reform of non-tradable shares the same features. From the view of companies, equity division reform, the corporate governance structure of a company changed, size before the interests of the shareholders to converge, middle and small shareholder interests were violations of the circumstance decreases, the incentive mechanism of management, and gradually establish a perfect structure of a company. The price of the stock is mainly decided by the company’s value. Due to the perfection of corporate structure, stock prices can be more reasonable reflect the company’s intrinsic value. From the perspective of China’s capital market, before share-trading reform, non-tradable shares owned stock in the secondary market circulation cannot profit, they made financing function as a means of encircling money, financing function lost. Shares as a commodity, should follow the law of value of commodity, the price should be paid by the intrinsic value of the stock and decision of supply and demand. But due to the existence of non-tradable shares, the holders of tradable shares accounted only a small part of the capital stock, accounted for equity most non-tradable only by way of transfer pricing, price is determined on the net, it all made capital market stock pricing function lost. After share-trading reform, big shareholders can through the secondary market trading to gain benefits. It inspired its ascension performance of listed companies’ motivation. Stock financing will no longer regard as encircling money tools. Numerous non-tradable into capital market circulation, greatly improved the reform of non-tradable shares before the stock market supply and demand imbalances, the listed company’s ownership structure changed. These are prompted stock pricing mechanism gradually market. The asset valuations function of capital market will restore and continuous improvement.Before reforming of non-tradable shares, China’s capital market did not include foreign mature capital markets’ characteristic, western mature stock valuation theory can’t achieve in China’s capital market. In order to evaluate stock price, Chinese scholars most used the constraints of the relative value method. But after share-trading reform, China’s capital market had western mature such as the full circulation, market pricing function recovery. Because relatively value method is Chinese scholars in order to adapt the capital market equity expediency. It adopted difficult to overcome defects, such as reference selection, did not consider risk.In order to find a suitable model for China’s stock price, based on reviewing the numerous classics of foreign capital market pricing theory and influence factors in Chinese stock prices, according to China’s actual situation of the capital market and the development of technology, I chose the fundamental index measurement analysis method to establish the stock evaluation model, the selection of the industry average price-earnings ratios, net assets yield, net asset per share, earnings per share, the current ratio this five explanatory variables to explain China’s stock price composition. Using empirical method proved the applicability of the model, and further expounds the conclusion and insufficiency. In this paper, the total structure was divided into five parts.The first part is the introduction. Introduction first illustrated the research background and the significance of the subject, the paper mainly was subject to the full circulation of significance to study the stock valuations. Meanwhile introduction also simple expounded in the process of research possible difficulties and drawbacks.The second part is the literature review. Based on literature review of foreign scholars’ research will separate the domestic research. This paper firstly described foreign literature classification, such as cash flow theory, the theory of effective market, capital asset pricing theory, relative value method theory, fundamentals of measurement index theory and olson theory. The theory of content and theory applicable range and subsequent research were discussed in this paper. In view of foreign scholars, its academic research results are summarized. Because before the share-trading reform, China’s capital market is different from foreign capital market, these theories were not applicability.The third part is the stock evaluation model based and influencing factors. China’s capital market, according to the empirical study did not reach the required conditions effective market, so efficient market theory also cannot use in China’s capital market. The capital asset pricing model also requires achieve the effective market, China’s capital markets temporarily failing to satisfy. Relative value method theory only considers earnings, neglect other affect stock value factors, not more accurate estimate for stock. Fundamentals measurement analysis theory only considered the quantifiable factors, olson theoretical assumptions conditions are not established for all industries.Analyzes the applicability of stock valuation theory, this paper considered the factor affect stock prices. The price of the stock is in the intrinsic value of the stock, market factor, political factor, as well as other factors. The intrinsic value of the stock is the company’s operation conditions and the development of the company, restructuring and acquisitions factors determine. Stock values are affected by the major factors of market supply and demand, market shares of investors and presence of market manipulation. The political factor is unable to avoid all capital market factors, especially in China, fiscal and monetary policies could affect the stock prices. Other factor refers to all the other may affect stock factors.The fourth part is the full circulation of stocks of companies listed on China’s constructing evaluation model. In constructing the stock evaluation model, this paper analyzes the full circulation for China’s capital market and the impact of the company. From the company’s standpoint, governance structure of a company change resulted in capital market financing function and stock pricing function can be recovered. Plus realized the full circulation,China’s capital market began to the international standards, introduced the theory of above of applicable degrees improved. In the comprehensive analysis of the above based on this article chose the fundamentals measurement index analysis methods for constructing this model, chose the industry average price-earnings ratios, net assets yield, net asset per share, earnings per share, the current ratio as explanatory variables, selected the non-tradable share reform in 2005,40 only grail sample, by adopting the method to determine the econometrics model parameters, and the model goodness-of-fit testing, significant test, regression coefficient significant test, residual sequence of independence inspection. Through the inspection, proved this model was good, in order to further applicability test this model was practical, this article 15 only randomly bulk lots stock, its market price forecast model analyses.The fifth part is the conclusion and insufficient. The last chapter in the summary above all content, mainly suitable for this model has completed the grail, reform of non-tradable shares were applicable for no further research paper, at the same time because of lack of knowledge, not considered external factors, explain factors choose whether reasonable also need time validation.