Study On Behaviors Of Non-tradable Shareholders Expropriating Tradable Shareholders’ Interest Under The Background Of Reduction Of Original Non-tradable Shares In Chinese Stock Market

In order to eliminate the dual structure of equity issues and improve the operationmechanism of the stock market, Chinese stock market began a campaign against theequity division in2005. Equity division reform has profoundly positive significance insustainable, is an inevitable choice of the development of securities market in China anda major initiative to strengthen the system construction and perfect the function ofChinese stock market system. In fact, since its implementation in2005, the equitydivision reform not only failed to make the Chinese stock market become more efficient,but made aberrant behavior and "financial anomalies" become more prominent andvisible. Although the reform has basically completed, the stock’s change in the truemeaning of completion is so far. So this paper systematically and thoroughly researchesthe behavior mechanism of original non-tradable shareholders expropriating tradableshareholders’ interest under the background of reduction of original non-tradable sharesin Chinese stock market in theoretical and empirical systems, from theoretical andempirical aspects. It will have important theory and reality meaning to explain actionmechanism and “financial anomalies” of the stock market during the reductionprocess of original non-tradable shares, enhance the supervising and managingefficiency of government to stock market, and further secure Chinese stock market’scontinuous, stable and healthy development.The main research work of this paper as follow:①This paper investigates the establishment and development of Chinese stockmarket, and the reduction process of original non-tradable shares after equity divisionreform. Based on these, it builds a model, from the perspective of the capital gains andholding cost of original non-tradable shareholders and tradable shareholders, to researchthe behavior mechanism of original non-tradable shareholders expropriating tradableshareholders’ interest under the background of reduction of original non-tradable sharesin Chinese stock market. The research results show that during the reduction process oforiginal non-tradable shares, the capital gains of original non-tradable shareholders willbe increased, the capital gains of tradable shareholders will be reduced, and theincreased capital gains of original non-tradable shareholders are equal to the reducedcapital gains of tradable shareholders; the expropriation amount is positively related tothe holding amount of original non-tradable shareholders and the holding cost of tradable shares, and negatively related to the consideration payment rate of the equitydivision reform.②On the basis of existing research, stock market-related data, descriptivestatistical analysis, and event study are optimized in this paper to research the behaviormechanism of original non-tradable shareholders expropriating tradable shareholders’interest under the background of reduction of original non-tradable shares in Chinesestock market. The results show that: there exists the phenomenon that the level ofvaluable consideration of public companies is less than the reasonable level on Chinesestock market; whether it is judging from the total amount, or from classification, thereduction strength of original non-tradable in Shenzhen stock market is higher than inShanghai, and there exists illegal reduction behavior; reduction of original non-tradablehas an significantly negative effect on Chinese stock market, which not only appears inshort-term, but also in long-term; there is obvious signs of stock price manipulationduring the reduction, existing phenomenon of non-tradable shareholders expropriatingtradable shareholders’ interest; the reduction of original non-tradable shares lead to adrop in the stock market, especially in a bear market.③Base on the theoretical and empirical results, the establishment and developmentof Chinese stock market, and the fact of equity division reform, this paper reasonablyexplains “financial anomalies” of the stock market during the reduction process oforiginal non-tradable shares.