Major Shareholders' Reduction?Profit Grabbing And Market Reaction Analysis

Since the stock market came into full circulation,one of the main ways for major shareholders to make money is by selling shares at high prices.With the arrival of the wave of reduction of a-shares market,major shareholders hold low-cost stocks,it is bound to cause reduction of arbitrage of the listed company's major shareholders.In order to stabilize the capital market,promote the development of the real economy and protect the interests of small and medium-sized investors,The CSRC issued new rules on reducing holdings in 2017,further strengthened regulatory over reducing holdings of major shareholders in listed companies.The Shanghai and Shenzhen exchanges added explanations to the new rules in 2018.Under such strict supervision,large-scale reduction of major shareholders,new pattern reduction and illegal reduction still occur from time to time,which have a serious negative impact on the securities market,company development and external small and medium-sized investors.In November 2014,reduction of major shareholders of royal group began,until September of 2018,there have been 8 times of reduction of major shareholders in royal group,including the reduction after the issuance of new rules.Major shareholders of royal group used large scale reduction to take away a lot of money,grabbed the interests of external small and medium-sized investors.The phenomenon that major shareholders often make profits by precisely reducing their holdings at high prices is worth further exploration.Only when we understand the various means by which major shareholders use the reduction of holdings to grab benefits and the market reaction caused by the reduction of holdings,it is helpful to supervise the reduction of major shareholders without blind angle,protect the interests of external small and medium investors,and promote the stable development of China's securities market.This paper takes the continuous reduction of shares held by major shareholders of royal group from 2014 to 2018 as the research object,dig out the real reasons for the reduction of royal group major shareholders,the way of profit grabbing and the market reaction.Firstly,it introduces the related concepts and theoretical analysis of the reduction of major shareholders,and then analyzes the possible relationship between the reduction of major shareholders and the profit grabbing and market reaction.Through the case analysis of the reduction of major shareholders of royal group,by comparing the operation and development status,financial status and cash flow status,shares price,net assets of per share of royal group from 2013 to 2017,it is found that major shareholders use reduction of holdings to hollow out the company and seize the interests of external investors,major shareholder of royal group reduced holdings for personal gain,controlling shareholders' reduction behavior based on support motivation was only verbal commitment;the influencing factors of continuous reduction of major shareholders of royal group are bad development of main industry,uncertain future prospect of multi-business development and overvaluation of stock price;under the behavior of reducing holdings of major shareholders of royal group,there were some ways to grab the interests,such as high-profile hyping concept with reduction,earnings management with beautification of performance with reduction,and new ways to reduce holdings.Using the event research method to analyze the market reaction.The excess cumulative rate of return(AR)and cumulative excess rate of return(CAR)during the window of 8 times reduction of holdings were respectively compared to explore the difference in the response of external small and medium investors to different ways of reduction of holdings.The results show that the external small and medium investors have a relatively mild reaction to the reduction of major shareholders during the period of good news,have a strong negative market reaction to the traditional way of reduction,and have a relatively insufficient response to the new way of reduction.The innovation work of this paper lies in the combination of theory and case analysis to fully explore the real motivation and means of profit acquisition for the reduction of major shareholders.For the 8 reduction events in the case,the AR and CAR in the window period were determined by using the market model,Stata statistical software and Excel tools,so as to analyze the difference of external small and medium investors' response to the traditional reduction ways and the new reduction ways under the new regulation.According to the results of the case study,it points out the deficiencies in the internal management of listed companies,external education for small and medium-sized investors,and the new regulation on reduction of stock holdings,relevant suggestions are put forward to promote major shareholders to reduce their holdings in reasonable ways,and small and medium-sized investors to treat major shareholders' reduction rationally,so as to protect the stable development of the capital market.