Do Executives Divorce Affect The Stock Market Reaction?

In recent years,the frequent "priceless" divorce cases have aroused high social concern.As important participants in economic sphere,entrepreneurs' marriage will not only cause their own wealth to shrink,their equity holdings to decrease,and their status in the company to decline,but they may also change the company's equity structure,affect the company's stock price,cause the decline of company value and even lead to the scramble for control rights,which has a great impact on the stability and long-term development of the company.Therefore,the divorce of listed company executives is the issue that listed companies must pay attention to.In the past,the research on the performance of the listed companies and the volatility of the stock price is mainly focused on the level of financial,capital structure,corporate governance and so on,and the research on the divorce events of senior executives mostly stays in the qualitative analysis such as news reports.Therefore,in order to enrich the related research in this field,this paper takes 30 senior executives' divorce events between January 1,2006 and January 31,2018 of China's A share listed companies as the research samples,uses the event study method to make a quantitative empirical analysis on the impact of senior executives' divorce on the stock price,and obtains the following conclusions:1.The divorce of senior executives has a significant short-term negative impact on the stock market of listed companies.2.The bigger the executive power,the greater the negative market reaction of investors caused by divorce.3.The proportion of equity split involved in the divorce of senior executives has no significant effect on the negative market reaction.Through theoretical analysis and empirical test,this paper expounds this hot issue,and puts forward countermeasures and suggestions from three dimensions:investor,company and executive.From the perspective of investors,investors in the stock market should rationally look at the divorce news of listed company executives in order to make the right decisions;private equity investors should include the marriage status of executives in the scope of venture capital agencies' consideration and evaluation of investment projects;the investors of the merger and acquisition should include marital status factors as parts of the pre-restructuring plan and legal due diligence.From the company point of view,the listed company should perfect the stockholder's family property agreement;the time of divorce may be appropriately chosen by the company to be listed in order to reduce the impact of the incident on the process of listing of the company;the family business may consider using the family trust to maintain the inheritance of the wealth of the family business.From the perspective of senior executives,company executives should be cautious about their marriage and sign pre-marital property agreements in advance.When divorce is inevitable,they should actively communicate and negotiate,and try to choose the way of paying discount to solve the problem of divorce equity distribution.