Selling Stocks Of Family Enterprises At High Prices And Stock Price Crash Risk

Since the starting point of the bull market in the second half of 2014, there had been a large number of cases of selling stocks at high prices. Major shareholders of family enterprises were the main force of selling, because of their purpose of profit and lack of obligation to safeguard stability. And then, the reduction was regarded as one of the reasons of stock price crash, which received widespread investors’ concern and media attention.Researches in domestic and foreign discussed selling’s effect on stock price, but have not been concerned about its effect on stock price crash and the risk. In domestic, when talking about behavioral agents of selling, none paid attenton to major shareholders of family enterprises. Therefore, this paper is aimed at family enterprises in Shanghai and Shenzhen stock markets, focusing on the reduction behavior of major shareholders, according to asymmetric information theory, signaling theory and behavioral finance, conducting empirical test on the basis of stock price crash risk model and event study method and case study on the Jia Family of LETV, to discuss family enterprises’ special nature of selling at high prices, and selling’s effect on stock price crash and the risk.This paper draws the following conclusions. Under the same conditions, family enterprises are more likely to selling at high prices than other enterprises. Family enterprises’selling at high prices leads to higher stock price crash risk, and may cause stock price crash. Selling of LETV at high prices harmed the interests of small investors, leads to higher stock price crash risk and stock price crash in short to medium term.This paper has the following innovation. From international perspective, this paper extends researches on influencing factors of stock price crash, focuses on the interrelation selling, stock price crash and the risk. And it combines empirical and case studies to strengthen conclusions of relations between selling and stock price. From domestic perspective, this paper extends the researches on behavioral agents of selling, focuses on major shareholders of family enterprises. Also, it improves researches on family enterprises’ nature in capital market from perspectives of selling and stock price.