Research On The Reason Why Executives Of The Listed Companies On The GEM In China Reduce Holding Stocks

Since the1990s, China has been investigating the construction of the capital markets. The GEM as an important platform for the development and growth of high-tech corporate finance, which experiences various setbacks, has finally presented in the capital markets in the October30,2009.The GEM released an indelible mark in the process of construction of multi-level capital market in China. Undoubtedly its birth has been placed too many expectations, which hope that Chinese enterprises generate world-class companies such as Microsoft, hope that we can early find the bright spot of the private enterprises in China, hope the GEM contributes to promoting the construction of the multi-level platform in China’s capital market. So we can see the importance of the GEM in China’s economic development.However, since the GEM opening day, it makes people surprise. As the negative impact of the "three high" phenomenon, the challenge of high-growth, executives resignation, executives reduction and so on, people begin to doubt whether it can be healthy and sustainable development in China. This paper intends to seize the core of executives reduction on the GEM to carry out research and to expect better helping the development of GEM.The first chapter introduces the research background, meanings of study, framework and content arrangements, research methods and the expected contribution of this paper.The second chapter of this paper is the theory and the literature review. By analyzing Principal-Agent Theory and Information Asymmetry Theory, reviewing insider trading and executive stock ownership, it lays the foundation for the following chapter.The third chapter is about the GEM’s overview and providing the hypotheses. We analyze the price earning ratio, growth, executives reduction and executives resignation from the companies listed on the GEM, and provide a theoretical basis and data supporting for the reduction of the GEM executives. Finally we provide the hypotheses both from the internal and external aspects.Chapter four of this paper is the empirical analysis. We choose the study sample which company listed on the GEM between2009and2010and use STATA12.0statistical software and EXCEL2007office software for statistical analysis and multiple regression analysis. Mainly around the internal valuation of companies listed on the GEM, the performance of the company and the external market environment as the three factors conduct study.The last chapter is the conclusions, recommendations and outlook. By empirical research we found three motives in executives reduction, which is the company valuation, performance prospects, the fluctuation of the stock market. The more company overvalued and fluctuated in the stock market, the more executives reduced. The more performed well in the company, the less reduction of the proportion of executives happened. Accordingly, the paper proposes four recommendations to improve the performance of GEM. Finally, we provide the deficiency of this article and future research directions.The expected contribution of this paper is:(1) Through the study, we can further enrich the content of insider trading in China.(2) GEM is a new plate in China. There are less empirical researches through data collection. This paper which combines internal features of companies listed on the GEM and the fluctuation in the external market to research executives reduction motivation is a creative.The lack of this paper is:(1) We only study the GEM executive reduction, not to compare the Main Board market and the Small board market.(2) Now many Chinese and foreign scholars research insider holdings changing commonly used event study methodology. They use different time window period to examine executives reduction point and extra income.(3) Executives also have increase. If joining such increase and reduction as a comparative study, we may found more executives shareholding’s changing secret.