The Relationshlip Between Management Shareholdings And Stock Price Synchronicity

As an emerging market, there exist lots of problems, including incomplete laws and regulations, irrational investors and low enforcement of supervision measures. These together can result in low information content of stock prices and high stock price synchronicity. According to the study of Morck et al(2000), it can be known that the synchronicity in China is the second highest after Poland, and high synchronicity can not only reduce the difference between companies, but also undermine selection, feedback and resource allocation functions of stock price. Therefore, the researchers in China have conducted a lot of related studies, attempting to find ways to lower synchronicity. Based on their results, this paper will discuss synchronicity from the perspective of management shareholdings for two reasons. One is that few scholars study the relationship between management shareholdings and stock price synchronicity, the other is the study can be supported in theory, since manager, as an insider, plays an important role in information asymmetry, and will improve information transparency when granting some stocks, which further increases information content of stock price and lower synchronicity. Besides, this paper explores the relation between management shareholdings and synchronicity on the condition of actual controller’s attribute and large shareholders control, for they have some influence on the management shareholdings effect.Targeted the listed companies from 2011 to 2013 in Shanghai Stock Exchange, this paper makes an analysis on the relationship between management shareholdings and synchronicity, and further explores the influence of actual controller’s attribute and large shareholders control will make on their relationship. After empirical analysis, several conclusions can be got: firstly, management shareholdings can effectively reduce synchronicity. They are significantly negative in empirical model, which means the more management shareholdings are, the lower stock price synchronicity is. Secondly, actual controller’s attribute can affect the relationship between management shareholdings and synchronicity. Through the empirical research, it is found that the relationship between management shareholdings and synchronicity is insignificantly negative in state-owned enterprises, but is significant in non-state owned enterprises, which may be caused by two factors. One is that complicated principal-agent relation, diversified management objectives and the official way to appoint managers in state-owned enterprise weaken the equity incentives effect, the other is that the stock stimulation plan to managers in state-owned enterprise is too unreasonable to motivate managers to work hard, for the shares they hold are low and are mostly granted based on their past performance, similar to welfare. Thirdly, large shareholders control can impair the relationship between management shareholdings and synchronicity, since it clashes with management shareholdings. It is proven in data examination that the cross-product term of large shareholders control and management shareholdings is significantly positive to synchronicity, but management shareholdings negative.In the end, this paper puts forward some recommendations, including establishing reasonable plan of managerial equity incentives, strengthening the external supervision environment to listed companies, cultivating rational investors and improving professional managers market, so as to lower synchronicity and optimize the resource allocation efficiency of market.