| In the year of2006, China’s A-share market entered into the full-circulation offering era, including the non-tradable share from Share Segregation Reform and the IPO new shares gradually trading on the market. Chinese stock market undertook the enormous pressure. A large number of restricted shares unlocking once again provoked the sensitive nerves of investors. Systematic supply shock was followed with stock market profusion vision. Stimulating the overall market sentiment was long-term at the weak state. However, the stock market was a country’s economic development "barometer", playing an important role in resource allocation. Long-term illnesses would suffer from seriously consequence. These problems attracted the attention of government regulators, entrepreneurs. Meanwhile, the academic sense about share lock-up was also increasingly prominent.In this paper, the SME and GEM Board of Shen Zhen Stock Exchange a total of258IPO companies were chosen as the study sample. This paper analyzed of the326unlocking events from the year of2010to2012. By event study method and multiple regression analysis to explore the internal mechanism of the listed company lock-up period arrangements and the restricted shares unlocking effects.A notable price-volume effect was found before and after the day of expiration. Statistics found that the average abnormal returns on unlocking day reached the lowest point-0.6533percent. The average cumulative abnormal returns reached its lowest point-1.7233percent before the unlocking day, and nearly a month after the event, the negative cumulative abnormal returns did not appear apparently reversal, remaining a-1.1127percent average cumulative abnormal returns. The eighth day before the lock-up expiration, It appeared the first abnormal trading volume peak, which meaned that the stock market reacted to the event. Then, on the days of T+0, T+11and T+15, the stocks were experiencing a similar abnormal trading volume increasing. The average abnormal trading volume of four days was+118.69percent, indicating that the listed companies restricted shareholders faced with market regulation and investors’ concern did not concentrate on selling the stock, but focused on strategic transactions in batches to avoid causing market panic. Comparative analysis found out that the sample companies listed on GEM before and after the expiration had a strong market response, but the average cumulative abnormal returns was more than the SME board listed companies and significantly reached to+6.3426percent. Finally, by observing the same one company at different unlocking time, with the increasing of the number of unlocking, abnormal returns gradually reduced. Hence, this paper supported a supply shock hypothesis.Firstly, listed companies IPO underpricing and the internal shareholding lock-up proportion constructed moral hazard and asymmetric information proxy variable to empirically test the lock-up arrangement. The results showed that the length of lockup and IPO underpricing had a significantly positive correlation, at the same time, the insider holding the lock-up share proportion was significantly negatively correlated with the length of lock-up, under the control of other factors. So this paper considered that the design of IPO lock-up length was commonly decided by the level of asymmetric information and moral hazard. An evidence that listed companies with venture capital (VC) tended to set a shorter lock-up period in order to achieve the strategic exit. The proportion of VC share-holding and cumulative abnormal returns owned a significantly positive correlation. Venture capital participated in corporate governance and kept the stock price steady. The companies with large-scale issuing were more willing to choose a longer lock-up and looked forward to future stock appreciation, and maximized wealth. There was no evidence to support the role of underwriter certification and the effect of equity structure on the lock-up length arrangement.Secondly, the regression test showed that the listed companies’cumulative abnormal returns were significantly negatively correlated with the lock-up length. This paper considered that the extent of insider shareholding lock-up could not effectively reduce the negative impact on unlocking. The abnormal condition resulted from irrational investment at stock market and the uncertainty of the value of the company in the future. The length of lock-up was commonly shaped by the company insiders, venture capitalists and the interests of the parties. The goal was to reduce the external concerns of the company’s value, thereby, reducing the risk of moral hazard and asymmetric information. Finally, this paper explored unlocking effect from the perspective of the theory of supply and demand. The results showed that supply shock variable and cumulative abnormal returns were significantly negative correlation. The coefficient was-0.0137, indicating that when the market supply increased by100percent, the shares fell1.37percent (absolute value). The improved demand proxy variables and cumulative abnormal return were significantly positive correlation, which meaned that demand improvements would help ease the price decreasing, the coefficient was+0.0249, indicating that when the volume increased by100percent, the stock price rose+2.49percent. There was a new proof that China’s stock market could absorb some new outstanding shares. The negative cumulative abnormal return was commonly decided by short supply shock and liquidity improving. The effect of unlocking depended on the price fluctuations, the greater the volatility was, the more seriously stock fell. Moreover, according to the above empirical findings and the basis of previous studies, this paper estimated the elasticity of demand curve for the stock market, that is, the reciprocal of supply shocks variable coefficient-72.99. Its meaning, the stock price fell1%, demand would increase by72.99percent, supported the downward stock demand curve theory. |
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