The Research On The Economic Consequences Of Divorce For Executives Of Listed Companies

The divorce of executives refers to the divorce of directors,supervisors,senior managers and important shareholders of listed companies,which often involves a large proportion of equity division's,and is known to the market through the notice of equity changes or the announcement of actual controller's changes due to the regulatory requirements of the CSRC.From 2015 to the end of 2017,there were 21 cases of executives' divorce according to the announcements in China's capital market,and the value of equity split involved was more than 1 billion Yuan in some cases.In addition,the myth of making billionaires by the division of divorced property stimulates the media's attention,also raises doubts about "fake divorce,real cash-out" and worries of small and medium-sized investors.As the number of people who can reduce their holdings increases after the split,executives are likely to take advantage of it,and avoid the "strictest new rules" issued by the CSRC.In addition,there was a case in China in 2017 when a start-up company was suspended due to the founder's suicide in divorce,which highlighted the divorce of executives is related to other stakeholders.Lee-ping Xu,points out that the executives' divorce event have caused negative response to the market in short-term,at the same time,the investigation of 5 performance indicators by industry median modifier,points out that the divorce have serious adverse effects for the company's performance by study of 13 cases happened between 2006 and 2014.Considering the changes in the regulatory environment,and the increase of 21 executive marriage events between 2015 and 2017,the related conclusions in the existing literature need to be further investigated and expanded.In recent years,foreign scholars have pointed out that executives' divorce will affect the company's operation and management,mainly reflected in the executive risk preference in investment decision making,executive pay for a lot of divorce will affect the executive compensation incentives,and divorce may break the joint management advantages.Therefore,the research on executive marriage change not only can provide necessary decision-making information to the managers of listed companies,but also has certain reference value for the small and medium shareholders and regulators to understand the executive marriage event.Due to the significance of executive marriage events,this paper refers to the research methods of Xu Liping,and includes the 21 new marriage events into the research scope of multi-case analysis.The economic consequences are carried out from the following three aspects.Firstly,the shareholder identity and executive position of the executives may change after the divorce.Secondly,this paper will take the short-term market reaction of divorce events and take the significant T-test analysis as the assistant.Thirdly,this paper introduces the performance comparison method with companies which haven't have executive's divorce,which will make up for the lack of data accuracy caused by the over-sized industrial division under the industry median adjustment method.This paper will start from the domestic and foreign scholars' comments on the executives' divorce.Then,this paper will base on the support of higher-order theory,conflict theory,and information asymmetry theory.Then it will describe the design of the case study,and examine executives' and their spouses' behavior of the company's shares after divorce event,executives' office performance,more statistical character of short-term market reaction,and the comparison with other companies.Finally,relevant conclusions are drawn based on the research results,and countermeasures are proposed for stakeholders.The research shows that :(1)The executives' divorce will affect the executive's employment,and the average resignation rate of the executives is about 33.3%(11/33)in the two years before the divorce to two years after the divorce.(2)The executives are more likely to reducing holding-shares after departure within 2 years.(3)The short-term market reaction to the executives' divorce negatively,especially for the divorce events which happened after 2015 or the third kind of family business.Besides the situation that the shareholding ratio of executives or the ex-spouses is reduced to less than 5%,and the announcement of financial information during the observation period were causing more intense reaction of the market;(4)The divorces before the issue of new regulation of reducing holding-shares in 2015 are more prone to have deterioration of the financial situation in long-terms,and combining the results of comparative analysis,this paper argues that the executives' divorce is likely to lead to the worse cash flows of operating activities,period expense ratio,ROE %,asset-liability ratio,and current ratio.