The Economic Consequences Of The Continuous Reduction Of Controlling Shareholders' Shareholding

Share splitting reform in 2006 fundamentally solved the problem of the separation of tradable and non-tradable shares in China's immature market.However,with the realization of the full circulation of stocks,the problems that have arisen are also increasing.The listing and transfer of non-tradable shares increases the profit-making path of controlling shareholders,and controlling shareholders with information advantages can reduce their holdings when the stock price is overvalued and obtain the benefits of the secondary market.The increase in profit-making channels has made controlling shareholders of listed companies prone to reduce their holdings and cash out in the circulation market.The continuous reduction,liquidation-like reduction and large amount reduction of shareholders have sent serious negative sentiment to the market,which to some extent hindered the normal and orderly development of China's stock market.At the beginning of this year,Jinzi China became popular with the help of KOIs,also known as celebrities who sell products on a live show,and as a result reached top price limits three times consecutively,combined with the artificial meat incident last year and the reduction of holdings after its listing.After analyzing the reasons for the controlling shareholders' reduction of Jinzi China,this article finds that the weak growth of the ham business is the most probable reason for the reduction.The controlling shareholders came to an awareness that the market prospects of the ham industry are limited,so they reached the idea of cashing out.In order to obtain the maximum benefit while reducing,the controlling shareholders of Jinzi China implemented three measures:firstly,carry out benefit transfer,tunnel and undercut the listed company;secondly,conduct market value management through mergers and acquisitions;thirdly,speculate on hot topics,push up stock price.Existing literature believes that multiple reasons such as poor financial performance,overvaluation of stock prices,over-concentration of equity,the entrenchment of controlling shareholders combined together result in their leaving the market.Through case analysis,this article finds that the core reason of the reduction of Jinzi China lies in poor financial performance,and other reasons are derived from the core reason.In addition,scholars believe that the reduction of controlling shareholders will have a negative impact on the market and disrupt the management of listed companies.In this paper,through the event research method,it was found that the two shareholder reduction actions of Jinzi China did not appear to have a negative impact on the secondary market.Through the comparison of financial data,it has been found that after the controlling shareholders of Jinzi China reduced their holdings twice in 2019,their operating income,total profit,earnings per share and return on assets have increased significantly compared to 2018,indicating that the controlling shareholders' reduction does not necessarily interfere with the operation and development of Jinzi China.