Research On The Influence Of Major Shareholders’ Shares Reduction Of Chengxin Lithium Based On Equity Incentive

On April 29,2005,the China Securities Regulatory Commission,with the State Council’s endorsement,issued the Notice on the Relevant Issues of the Pilot Reform of the Non-tradable Share Structure in Listed Companies,thus initiating the reform.This marked a notable increase in equity liquidity,however,it also caused a multitude of issues.One of the significant problems comes from the adverse impact of major shareholders selling shares on the company’s performance and even the whole industry,that is,major shareholders reducing their holdings.Such actions tend to hurt the interests of other small investors.Not only that,it has a negative impact on current behavior decisions and future development of the entire company.In order to standardize various economic behaviors,the regulatory departments have issued relevant documents to cooperate,and strengthened the governance of major shareholders’ reduction of holdings and other issues.Therefore,some major shareholders of listed companies began to use equity incentive plan as the main tool to reduce their holdings.This paper will analyze the effects of major shareholders’ reduction of holdings on the company’s equity incentive plan,with the aim of providing new insight to further explore the relationship between them in the future.Chengxin Lithium is a new energy enterprise with good development momentum in recent years.In 2020,it began to release announcements of equity incentive plans one after another,and soon after the announcement was disclosed,a large number of major shareholders reduced their holdings.This special situation is worth exploring.This paper begins by examining pertinent literature on equity incentive plans and the divestment behavior of major shareholders,and then summarizes the motivations and effects of both executing equity incentive plans and finishing major shareholders’ divestment behavior.In the case study,the company profile of Chengxin Lithium Energy is introduced respectively,and the events of major shareholders selling down their holdings under the background of equity incentive,and then the behavioral motivation and influence are emphatically analyzed.The primary findings of this paper,as revealed by the above analysis process,include following conclusions.Firstly,the major shareholders have the incentive to decrease their holdings following the implementation of the equity incentive plan.Secondly,a large number of major shareholders’ selling behavior will bring about adverse economic effects on corporate value,financial indicators,and small and medium investors.Finally,the motivation of implementing the equity incentive plan should not become the means for shareholders to seek excessive profits.