Research On Relationship Between Trading Behavior Of The Controlling Shareholder And Corporate Performance In The Background Of Full Circulation

The trading behavior of the controlling shareholder in the secondary market has been the focus of the study of earlier periods in the field of foreign corporate governance, but based on history and other factors, many of the research findings and policy recommendations cannot be directly applied to the current status quo in our country. In terms of the domestic situation, before the split share structure reform, research in this area is mainly concentrated in the tunneling behavior of the large shareholders as well as the relationship between ownership structure and performance. With the split share structure reform, controlling shareholder’s stock gradually has the circulation right. The trading behavior of the controlling shareholders in the open market gradually has been studied.But in different stages and background conditions, the controlling shareholder transactions motives may have a great difference. Based on the conclusions of the study of domestic scholars, after the original non-tradable shareholders gained the circulation right, they always reduce their stocks through the open market to receive cash. Then, in the background of full circulation, the transaction behavior of the controlling shareholder has been more and more based on the expectations of the company’s performance (good and bad) or the deviation of stock valuation (overestimated or underestimated).We draw the following conclusions through the theoretical and empirical analysis in this paper:First, the controlling shareholder increase their stocks based on the capability of long-term development rather than short-term fluctuations in performance. The controlling shareholders always sell of their stocks because of the expectations of the poor performance of the company and lack of profitability.Second, the trading activities of controlling shareholders have led to a significant market reaction in a short period of time. Third, in2009, the growth ability, profitability and cash creativity of the increase-group has gained significant improvement. Meanwhile, there is a significant reduction in profitability and capital efficiency in the reduction-group. Forth, compared with2010and2008, the significant performance improvement of the increase-group has continued. The downward trend of performance in the reduction-group has been eased, showing better performance prospects and development. Fifth, for investors, it is a good idea to keep a rational view of the trading behavior of the controlling shareholders to avoid kinds of risks. For policy makers, it should step up supervision of the information disclosure of listed companies to punish all kinds of the insider trading, and to protect the interests of small and medium investors.