Research On Motives And Impacts Of Major Shareholder’s Reduction In Perfect World Co.,Ltd

The reform of non-tradable shares injects vitality into China’s capital market,and at the same time causes the problem of excessive reduction of major shareholders,which has a very negative impact on the market.Since the stock market crash in 2015,the regulatory authorities have updated the laws and regulations for many times to better regulate shareholders’ behavior of reducing their holdings and provide a more fair environment for the financial market.However,the phenomenon of illegal reduction of holdings is still forbidden repeatedly.Major shareholders take advantage of the information advantage of insiders to reduce their holdings in a reasonable position to seek personal interests.Because the frequent malicious reduction of holdings will lead to the decline of market vitality,the interests of investors are damaged,so it is urgent to carry out a deep discussion on such cases.In this paper,Perfect World Co.,Ltd.is taken as the object to analyze the motivation and impact of major shareholders’ reducing their holdings several times during the period from 2018 to 2020.This paper uses a variety of research methods,such as case analysis,event study,comparative analysis and so on,to explore the motivation of the major shareholders of Perfect World to reduce their holdings and the subsequent economic impact.The body part is divided into five chapters: Chapter One is the introduction.Starting from the changes of regulatory policies of CSRC in recent years,the background and significance of the case study of this paper are expounded,and the overall research ideas,methods and basic framework of this paper are introduced.The second chapter introduces the concept of the reduction of major shareholders,and introduces the classical theories involved in the study of the reduction of shareholders.Combined with the analysis and collation of previous literatures,the theoretical basis for the case study of this paper is constructed.Chapter3 cases of underweight for perfect world system is introduced,include the company profile and all previous holdings details,etc.,and then analyzes the company internal and external information,put forward a perfect world major shareholders holdings industrial development limited,enterprise valuation,are behind the big shareholder loan repayment cash flow pressure,equity balance degree is low,the external regulation is not perfect,a total of five factors.Article also USES the comparison analytic method,with industry competitors as a reference,reduction of measure is perfect before and after the change of the world’s financial performance,found perfect world after reducing its profit ability,debt paying ability and growth ability are the downturn,which demonstrates the major shareholders take advantage of information forecasting in advance to the company’s future performance decline,and choose underweight in advance in order to avoid the loss of the catalyst.The fourth chapter studies the impact of the reduction of major shareholders in the perfect world.Based on the event study method,the Fama-French three-factor model is used to construct the regression expression,calculate the CAR and BHAR indexes,and measure the excess return of stocks in the short-term and long-term dimensions respectively.The research found that the short-term excess return rate of stocks decreased significantly in the next trading day after the reduction of holdings,but increased rapidly,which confirmed that the reduction of holdings by major shareholders would indeed have a negative impact on the market performance of stocks,and also indicated that the market digested the negative information of the reduction of holdings quickly.The study also found that in the long-term time scale,the excess return is significantly negative,indicating that the major shareholders achieved excess return through reducing their holdings,while damaging the interests of the minority shareholders.The above results also indicate that large shareholders have poor short-term timing ability,but excellent long-term timing ability.The last part of this chapter on underweight probes into the influence of equity structure,found that underweight can lead to increase in the number of shareholders,the reason is that large shareholders,institutional investors and individual investors constitute a conductive path,large shareholders,by reducing its transferring chips to institutional investors,institutional investors after the ban on selling chips will attract a large number of individual investors to enter,and this process is accompanied by the fall in share prices,eventually leading to the rights and interests of the investors.Based on the research conclusions of other chapters and the actual situation of the reduction of the major shareholders of Perfect World,the fifth chapter provides three suggestions to the regulatory authorities in terms of strengthening the principle of information disclosure,intensifying punishment and setting up a platform for investor rights protection.Based on Perfect World major shareholders holdings,a case study,enrich the empirical study of major shareholders holdings action,at the same time puts forward the corresponding policy recommendations,to better help regulators to standardize financial market behavior of each participation main body,help promote China’s financial market allocation of resources at the core of the function,maintain the equity and justice of the financial markets.