Comparative Study On Reduction Behavior Of Controlling And Non-controlling Large Shareholders

The reduction of major shareholders has always been the focus of the stock market and academia.However,most of the previous studies defined large shareholders as "shareholders holding more than 5% shares" or "top ten shareholders",there is few literature that divides large shareholders into controlling shareholders and non-controlling large shareholders.Even if they are both large shareholders,there are still significant differences between their behaviors of large-scale reduction,so it is necessary to divide the reduction of large shareholders into that of controlling shareholders and that of non-controlling shareholders.This study uses Sunwin Intelligent co.,Ltd.(stock code: 300044)and By-health Co.,Ltd.(stock code: 300146)as study cases,to examine the differences between controlling and non-controlling large shareholders' reduction from following aspects: the motivation of reduction,information disclosure and earnings management,as well as the impact on stock market and company performance after reduction.The study shows that there are significant distinctions between their reduction behaviors.First,the motivation of controlling shareholders' reduction tends to obtain reduction benefit in maximum,while the non-controlling shareholders,except for the pursuit of capital gains,will also reduce their holdings when the company is facing negative impacts.Second,both of the controlling shareholders and non-controlling shareholders will carry out certain information manipulation before their reduction.But the degree of manipulation of the controlling shareholders is much stronger because of their more control rights and information advantages compared with others.Third,with regards to the earnings management,controlling shareholders tend to carry out real earnings management in order to gain more interests of reduction.However,the non-controlling large shareholders,due to the weakening of their control over the company and the restriction of the controlling shareholders,only can manage the accrued earnings management.Finally,in the aspect of economic consequences caused by reduction,the study shows that the cumulative abnormal return of controlling shareholders' reduction presents a significant inverted V,while that of non-controlling large shareholders' is not obvious.In addition,from the point of influence on company,the study reveals that the reduction of controlling shareholders brings a long-term negative impact on the performance of the company,rather than the short-term performance of the non-controlling large shareholders.The study of this paper has theoretical and practical significance on the subject of major shareholders' reduction.Theoretically,the major shareholders were divided into controlling shareholders and non-controlling major shareholders to study reductions,and it is concluded that there are differences between their reduction behaviors.Practically,relevant suggestions are provided for minority investors and regulators.Investors should identify different information manipulation and earnings management behaviors of major shareholders' reduction and take corresponding measures in time,and the regulatory focus should also be different.