Research On The Impact Of Shareholders' And Executives' Reduction Behavior On Stock Price

In recent years,the frequent reduction of shareholdings by major shareholders and executives of listed companies has had a certain impact on the stock price of the secondary market.The reduction of shareholder and executives has been closely watched by small and medium investors and has had an important impact on their investment decisions.Large-scale reductions will have a negative market effect on the stock prices of listed companies.Vicious reductions and violations will seriously damage the interests of small and medium-sized investors,which will have a huge impact on the Chinese stock market.Large shareholders,senior executives and other insiders have certain information advantages.They will choose to reduce their shares at a certain time,thus transmitting signals to investors in the market,affecting the public's expectation of stock prices and having a certain impact on the stock price.The predecessors' research is mainly based on the theory of insider control.By analyzing the announcement effect of the reduction of large shareholders and executives,the impact of the reduction behavior on the cumulative abnormal return rate of stocks is studied.However,investors have different views on listed companies with different characteristics about evaluation,valuation and investment confidence.Therefore,in the process of reduction of major shareholders and executives,the market reaction of listed companies with different characteristics is different.In this background,based on the previous studies,this paper combines the reduction of corporate governance and financial indicators based on corporate governance and internal control,empirically analyzes the market reaction of companies with different characteristics after reduction and discusses the impact of major shareholder and executive's reduction behavior on stock prices in-depth.Firstly,this paper reviews the motives of internal people's reduction,the timing of internal reduction and the impact of insider trading on the company.The author discusses the factors which affect the value of the company,and reviews the paper on the impact of major shareholder and executive reduction on share price.Based on the predecessors' theory,the author finds the research points of this paper.In the following,this paper sorts out the theory of corporate governance regarding the reduction of major shareholders and executives,compares the reduction policies of the United States,Hong Kong and China,and gives a classic case of illegal reduction.Finally,This paper uses the event-study method to examine the reduction of holdings of listed companies in China's A-share market from 2014 to 2016.This is used as sample data to analyze and calculate the cumulative abnormal rate of return of shareholdings which major shareholders and executives reduce during the window period.Then,the financial indicators such as return on net assets and total asset turnover rate are introduced as control variables to create a multiple linear regression model to study the impact of major shareholder and executive reduction behavior on stock price.The main innovative work and conclusions of this paper can be summarized as follows:Firstly,based on the data of China's A-share listed companies,this paper uses the event-study method and multiple linear regression to explore the market reaction of major shareholders and executives5 shareholding reduction.The research introduces relevant corporate governance and financial indicators,verifying the impact of major shareholder and executives'shareholding reduction on share prices of different types and characteristics of companies.Secondly,this paper innovatively introduces the frequency of major shareholders'reduction during a period of time,lengthens the window period of event research,uses the CAR of one year as an indicator of long-term market reaction,and verifies the impact of frequency of major shareholders' reduction on long-term CAR.The study finds that the shareholder and executives' reduction behaviors will have a negative impact on the stock price during the window period of the reduction.The greater the reduction ratio of major shareholders and senior executives,the greater the negative reaction of the stock price.In terms of shareholding reduction of major shareholders,the lower the growth of the enterprise,the greater the negative reaction of the stock price.The lower the concentration of equity,the greater the negative reaction of the stock price.The higher the frequency of reduction,the greater the negative reaction of the stock price.In terms of shareholding reduction of executives,the higher the financial leverage of the enterprise,the greater the negative reaction of the stock price.The lower the equity balance,the greater the negative reaction of the stock price.Finally,according to the research conclusions,suggestions are made from four levels:insiders,regulators,listed companies and investors:internal shareholders such as major shareholders and senior executives should regulate their own reductions;securities regulators should establish and improve laws and regulations on reduction of major shareholders and senior executives;listed companies should strictly disclose information in accordance with regulations to improve the quality of information disclosure;investors should rationally analyze the reduction of internal shareholders such as major shareholders and executives,make correct decisions,and avoid unnecessary loss.The research of this thesis has certain reference value for the decision of the company's management,the investment of market investors and the supervision of the regulatory authorities.