Research On Large Stock Dividends And Selling Behaviours Of Large Shareholders

The Type ? Agency Problem caused by the inconsistent interest between major shareholders and minor shareholders has been focused by researchers in corporate finance field.After the reform of state ownership,increasing major shareholders in Chines listed companies began to impose an impact on the stock price through their information advantage and right of control,and further obtain interest from minor shareholders.One of the most common methods to increase the profitability of selling stocks is high stock dividend,which is generally considered as a positive news in the capital market.Therefore,this paper aims at the relation between the high stock dividend and major shareholders' sell to explore the path through which shareholders gain interest.The administrators could impose related restriction to protect shareholder's right based on this research.This paper initially analyzes the opportunism behaviors based on agency theory and asymmetric information theory.Then,the paper further reviews literature about stock dividend,and research on the relationship between the announcement of stock dividend and shareholder's selling to answer “whether” and “how much” the shareholders sell their stocks after stock dividend.Finally,I collect the stock dividend and insiders selling data in China security market from 2006-2018,and employ multi-linear regression to study the hypothesize below.Firstly,whether the major shareholders prefer selling their stocks after a high stock dividend has been announced? Secondly,does corporate governance restrict this opportunism behavior? Thirdly,does shareholders sell more shares after a high stock dividend.Fourthly,are the relationship between sell size and high stock dividend related to both firm-level and individual-level heterogeneity?The result shows that,compared with normal stock dividend the high stock dividend increase the probability of shareholders' selling their stocks,and this can be weakened by corporate governance,i.e.the major shareholders do utilize their inside information and intentionally advance the high stock dividend to improve their profitability through trading.Existing works have proved that firms often suffer a downwards trend in both performance and stock return.And,insiders' selling behaviors in this period can further deprave the situation.Moreover,the average size of selling after high stock dividend significantly raised,which implied that shareholders take the opportunity to sell more stocks.This can have an adverse impact on the fairness and development of the security market.In the sub-sample research,it is found that shareholders in companies which has publish offered in 2 years less likely trade their stocks in the specific period,which may be related to shareholders' motivation of selling stocks.A similar relation is also observed in founding shareholders' behavior.Finally,to ensure the result to be robust,I tried to change the length of event window and main dependent variables.According to the analyzing and empirical result,this paper provides advices to administrators,corporates and individual investors.Administrators should impose a stricter law to restrict shareholders from tunneling and decrease the information asymmetric.On the other hand,the listed companies should base their dividend policy on corporate performance instead to enhance the positive effect of stock dividend.Finally,the investors should learn more about the nature of the announcement of stock dividend,and avoid to make investing decision irrationally.