The Study Of Major Shareholders’ Increasing Holdings Of Listed Companies On Short-term Effect

In the time of partitioned stock structure, the state-owned shares and legal person shares could not be traded in the secondary market. The interests of the state-owned or legal person shares and the secondary market shareholders were split. The large shareholders could take advantage of the control of listed companies to encroached on the interests of minority shareholders. After the split stock structure reform finished, the state-owned shares and legal person shares also added to the ranks of the secondary market transactions.The level of stock price was directly related to the value of their own shares. At the same time, the government had introduced policies to encourage this behavior, leading the large shareholders’holdings to become active.Analysising the characteristics and the market effects of the holdings of major shareholders has an important role for the development, prosperity and stability of the stock market in China,and it is a useful reference work for the government departments, the operation of the large shareholders and the minority shareholders.As the emergency of the major shareholders’increasing holdings is relatively short,it is still in infancy stage for its study.It is lack of systematic theoretical and empirical research now.In the existing studies,they analysis the main motivation and the announcement effect of the major shareholders’ increasing holdings of the listed companies. As to the stock repurchase behavior,most of the existing studies have shown that the major shareholders’ increasing holdings was motivated by the signaling effect,indicating that the company’s share price is undervalued.There will be a positive average abnormal returns and cumulative abnormal yield within a short period after the announcement. But,there are other scholars pointing out that the performance of the company which has the holdings behavior is weaker than the company which has not fulfilled the holdings of commitment. And the holdings of major shareholders exists manipulating stock prices,inflatting the value of assets and so on.This paper mainly uses the data which occurred from September2008to June2012in China’s A-share market as the research object, taking a combination of theoretical and empirical methods for investigating the behavior of short-term market effects.Meanwhile, in order to test the robustness of the results, the article is divided into different sub-samples in accordance with certain standards. The main contents include the following aspects:First, we will review the existing research results at home and abroad. Foreign scholars rarely study the large shareholders as a separate object,generally as a whole to research insider trading behavior.And scholars at home and abroad for the large shareholder holdings of stock behavior are relatively rare, but it mainly studies the stock repurchase. Holdings of major shareholders is similar to the stock repurchase to some extent. Therefore, this paper mainly reviews the domestic and international insider trading behavior and stock repurchases, and in recent years the large shareholders’holdings. In terms of insider trading, this paper analysises the research results of London, Hong Kong, China, Switzerland, Germany and China, showing that insider trading brought short-term excess returns. In terms of the stock repurchase, most scholars confirmed by empirical test that it would produce positive market effect and enhance the performance of the company in the long term. The minority scholars showed that the excess returns were not significant because of the different time of inspection and data.For the holdings of major shareholders of listed companies, it mainly researched the market short-term effect of the announcement. Some scholars believed that it existed a positive abnormal returns and stimulated a rise in stock price in short term. However, the test of Huijin holdings of shares in state-owned banks pointed out that the holdings might stop the market falling in a relatively short period of time, and then would continue to return to the down channel.Secondly, the paper analysises the efficient market theory, information asymmetry theory, signaling hypothesis, the theory of market timing and excessive reaction theory,providing a theoretical basis for the holdings of major shareholders. Thirdly,this article provides an overview of the development of the major shareholders in China in recent years. In April2005, the China Securities Regulatory Commission issued the notice about the split stock structure reform, China’s securities market had entered an era of full circulation, leading to the first share holdings tide in2005and2006. The main purpose was to promote the conduct of the split stock structure reform. Because the legal system was not perfect, there existed the price manipulation and other illegal trading behavior. But overall it played the role of stabilizing the market.The2008financial crisis made China’s stock market malaise, many listed companies fell below the net.At this time large shareholders began to hold their own shares of the company, Leading to a second wave of holdings tide.By the policies and support of the relevant departments, China’s stock market was gradually stabilized. In2011, the spread of the debt crisis mad the development of the global economy blocked,and it had serious inflation in China. Facing with the downturn in the economic situation, capital markets again emerged massive holdings of stock behavior. This time it was in a more comprehensive laws and regulations, Policy control of the relevant government departments was more powerful.And the holdings of the market reaction was also very significant.It provided more favorable data for holdings.In the empirical part,this paper uses the event study method to test whether the holdings of behavior has a positive announcement effect through the inspection before and after the period of notice of the existence of cumulative excess returns, conclusions are as follows:The average abnormal returns in the event window (-2,0) is1.8394%.It is significantly positive,explaining that information has been leaked before the company released overweight announcement.(-1,+1) And (-2,+2) windows’average abnormal returns are also significantly positive.But the event window (-5,+5) average abnormal returns isn’t significant,and announcement within20days after the date of the abnormal cumulative gains is not significant,either. Showing that the larg shareholders’holdings of behavior is a good news for the market, but only a very short-term role to stimulate the stock. The results of the analysis announcement of the future event window (0,+1) and (0,+2) abnormal returns are not significantly positive,providing that external market investors can not get some benefits from observing the holdings of major shareholders.As an innovation of this paper, the total sample is divided into different sub-samples in accordance with the different exchanges,different years, different industries, the large shareholders’ stake as well as the large shareholders’ holdings to test the announcement effect’s soundness. The result shows that the holdings announcement positively impacting on the short share price is a universal phenomenon, and there is no systematic difference.First, there is no significant difference between the Shanghai Stock Exchange and Shenzhen Stock Exchange.Second, the signals in different years are positive,only in the Mavericks2009that the announcement effect is not very significant.Third, the sample is divided into manufacturing and other industries, the results of the two sets of data are also significantly positive. Fourth, the state holding samples in the secondary market behavior have favorable effect and longer duration than non-state-owned holdings.Fifth, in accordance with the different stakes, the holdings of the market effects about the absolute holding company in more than50%stake or the relatively low proportion of the shareholding company (0%——30%) is less than the center stake of the large shareholders (30%——50%). Investors may think that the company which the ownership structure is relatively reasonable has greater willingness to increase his holdings.They can either adjust the shareholding structure through the purchase of shares,or communicate the company’s confidence in the future development in the case of the departure from the intrinsic value of the company’s share price. Sixth, We also find that the proportion of initial holdings of higher and lower sample’s cumulative abnormal returns is greater than the holdings of the center sample by dividing the sample into three groups according to the holdings of the top30%, middle40%and the latter30%. This paper argues that the holdings of the low proportion will enhance investors’ expectations,and holdings of the high proportion shows that the company has confidence in the future development. Seventh, holdings of major shareholders in the bear market has greater abnormal returns than the bull market,explaining that the bear market can convey positive messages better.In order to make the holdings develop toward a more stable and effective direction,this paper gives recommendations to the laws and regulations, major shareholders, minority shareholders and outside investors.we should continue to strengthen the laws and regulations of the behavior of major shareholders to formulate and improve the information disclosure system. Large shareholders can increase their holdings when the company’s share price is lower than the actual value to pass signals of good development prospects. We need to improve the corporate ownership structure to protect the minority shareholders’ interests.For external investors,they should fully interpret market information,select companies with good growth capacity and be wary of the manufactured trap.The shortage of this article is that some difficulties in the data collection have a certain impact on the test result.The result has some volatility and errors because of inherent defects of the market model used in the empirical analysis. This article analyzes only the behavior of short-term holdings of major shareholders’ announcement effect and its soundness. they do not further analysis whether the motivation of the holdings of major shareholders is different and examine whether it will affect the future results of the company. For future research, we can improve the relevant data and use different models to test and ensure the accuracy and reliability of the conclusions. We also need specific analysises of the different sub-samples to test the motivation and future results. Furthermore,we can have the horizontal comparisons between company shareholders, executives, supervisors, and other internal traders,or find if it is similar when holdings of major shareholders occurs in the A shares, B shares or H shares.