Research On The Economic Consequences Of Major Shareholder’s Reduction

Focus Media,as the first China concept stock to return to the domestic A-share market,due to the domestic enthusiasm for the concept of Chinese stocks,after returning to the domestic A-share market in 2015,its stock price rose sharply.However,only two years after the company returned to the market,its shareholders began to undergo large-scale shareholding reductions.In 2017,the cumulative number of shareholding reductions of key shareholders of Focus Media reached 49 times,and the total amount of shareholding reductions was about 15.19 billion yuan,which became the listed company with the highest shareholding reduction in the stock market.At the same time,Focus Media’s shareholding reduction incident occurred again in the context of the release of the new regulations on shareholding reduction in 2017.As the new regulations add more rules for reducing shareholdings,shareholder reductions are subject to stricter supervision.According to the statistics of the reduction information of important shareholders in the Wind database,it is found that compared with 2016,the cumulative reduction of the major shareholders of listed companies in 2017 was about 201.578 billion yuan,and the reduction of the reduction amount reached 39.51%.The new regulations did produce some effects.However,even in the context of the most stringent reduction of new regulations,the shareholders of Focus Media still have large-scale reductions.Therefore,through the research on the company’s shareholding reduction events,on the one hand,it can explore new perspectives on this reduction event based on the characteristics of the China concept stock,on the other hand,it can discuss its reduction methods in light of the new regulations and propose new regulations recommendations etc.Based on this as the starting point,this article selects Focus Media as the object of case analysis,based on case studies,combined with previous research,based on principal-agent theory and information asymmetry theory,using literature research,case analysis,event research and finance Index analysis,etc.,to study the motivation and process of the company’s major shareholder reduction,and focused on the economic consequences of its major shareholder reduction.The main research content of this article is to first review the major shareholders’shareholding reduction events,and then analyze the motives of Focus Media’s shareholder reductions based on the external environment,the development of the company and the arbitrage space of the stockholders in China.Secondly,this article analyzes the method of reducing shareholding used in the process of reducing shareholdings of large shareholders based on the new rules of reducing shareholdings,and discusses the timing of shareholding reductions based on the information asymmetry theory.Thirdly,from the three aspects of market response,changes in financial performance and changes in corporate value,the economic consequences of Focus Media’s shareholder reductions are studied.Finally,based on the research results,it puts forward some relevant proposals for external agency supervision and internal corporate governance.The research conclusions of this paper are as follows:First,the motivations of Focus Media’s major shareholders to reduce their holdings mainly include the company’s unclear future performance and its large arbitrage space as a shareholder of the Chinese stock company to reduce its holdings.Second,in the way of reducing the shareholding of Focus Media’s major shareholders,in order to maximize supervision evasion,Focus Media’s reducing shareholders actively broke away from the status of major shareholder.In order to reduce shareholdings quickly,shareholder reductions are more often used to reduce holdings by agreement transfer.Third,the timing of the major shareholder shareholding reduction of Focus Media is to carry out shareholding reduction operations during the release period of favorable and intensive research reports and the release period of favorable corporate announcements.Fourth,in the economic consequences of the major shareholder reduction of Focus Media,the overall performance of short-term market response and financial performance has a negative impact,while long-term corporate value has a positive impact.Based on the above analysis and research conclusions,the enlightenment and recommendations made in this paper are as follows:First,the Chinese stock-share type enterprises should establish an exit mechanism for privatized consortia.Second,improve the supervision of shareholders of China concept Stock.Third,improve the supervision of the method of agreement transfer reduction.Fourth,strengthen supervision over information disclosure by enterprises.