The Impact Of Margin Trading On Liseted Companies Profits And Risks

On March 31, 2010, the securities lending and borrowing business mount the stage of the capital market in China formally served as a major financial innovation in China’s securities market, which had a huge impact to financial market. So far, the margin trading has been run in the capital market in China for five years. As the margin stock mark are expanding reflected from changing numbers of marks from the initial 50 to 90, its volume and balance of trade is growing rapidly accordingly. At the same time, it also enhances investors to participate in. Consequently, on the occasion of the rapid growth of margin trading, this paper will carry out an empirical study aiming at validating the impact of securities lending and borrowing business on investors,For investors, margin changed the way of profit under the condition in which only stock prices increased; when shares fell, investors can profit by borrowing short mechanism to make profits. Therefore, investors in the stock market gained a new trading patterns and profit channel. At the same time, as a lever of credit trading mechanism, margin has amplification effect for the returns and risk of listed companies. Thus, this article selects two dimensions of benefit and risk of listed companies to carry out research. Considering margin is the enterprise that undertakes a liability, measures on the basis of the overall risk of the liquidity risk of the enterprise were studied separately. Hence, based on the perspective of listed companies, research selects margin transaction data and financial indicators stemmed from the listed companies from 2011 to 2014, by using of descriptive statistical analysis, data stationarity test, Hausman test, and least squares method of regression analysis comprehensively, to validate empirical research on the margin of the influence of the returns and risk of listed companies.Through empirical study, a few conclusions as followed: first, the securities lending and borrowing business of listed companies’ earnings have positive effect, that is, the margin and the net interest rate of the total assets of listed companies has significant positive correlation. Second, margin trading can strengthen the risks of listed companies, which showed significant positive correlation between margin volatility and the performance of listed companies. Third, margin trading can strengthen the liquidity risk of listed companies, namely margin and measure liquidity risk index- current ratio has a negative relationship, but have not reached a certain level of significance.Conclusion showed that margin trading can bring the listed company earnings as well as increase the risk of corresponding at the same time. Based on this, this article provides suggestions from two aspects of the listed company of margin trading listed companies: reasonable control of margin size and strengthen the risk prevention, with the purpose of creating more value for company with this new way of trading, under a certain level of risk to obtain more profits.