Analysis On The Motivation And Effect Of Risk-free Shareholding Increasing By Listed Companies

China’s stock market is plummeting,and when the stock index plunges,the “Risk-free Shareholding Increasing” appears as a way to save the market.The “Risk-free Shareholding Increasing” initiative is usually issued by the actual controller of a listed company in his personal capacity,calling on employees to overweight company stock within a specified period.The initiator uses personal funds to compensate the employees for the losses incurred as a result of the stock increase,but generally requires the employees to hold the shares for more than 12 months and not to leave the company,otherwise they will be responsible for the losses.By the end of 2021,the “Risk-free Shareholding Increasing” has occurred six times in total,and most of the occurrences have occurred during the downward phase of the stock market,and the number of listed companies involved has grown significantly.Currently,the“Risk-free Shareholding Increasing” is usually interpreted as positive news,the controlling shareholder conveys the recognition of the company’s future development prospects to employees and the market by using the “Risk-free Shareholding Increasing” initiative,with a view to stabilizing or boosting the company’s share price.However,as the number of companies using the “Risk-free Shareholding Increasing” increases,problems such as impure motives for controlling shareholders to issue,unclear commitments to fulfill and lack of regulatory policies are gradually exposed.Obviously,it is of strong practical significance to study the intrinsic operating mechanism and the effect of the underwriting increase.Based on theories related to signaling,incentive compatibility,and herding effect,this paper explores the impact mechanism of the “Risk-free Shareholding Increasing” on the market effect and financial performance of listed companies and selects Hylander as the case study.Firstly,this paper reviews the implementation plan and process of Hylander’s three“Risk-free Shareholding Increasing” events and analyzes the motivation for its proposals.Secondly,the event study method is used to measure the excess return of Hylander’s three“Risk-free Shareholding Increasing” events and analyze their market effects by combining share price and volume fluctuations,and measure whether the “Risk-free Shareholding Increasing” has an impact on corporate financial performance by comparing relevant financial indicators.This paper finds that: First,the main motivations for listed companies to release“Risk-free Shareholding Increasing” include passing good news to boost the company’s stock price;alleviating the risk of equity pledge liquidation;creating conditions for subsequent reductions in arbitrage and reducing implementation costs.Second,the implementation of the“Risk-free Shareholding Increasing” by listed companies has a positive market effect in the short term,which plays a role in stabilizing and boosting stock prices.However,with the increasing usage of the “Risk-free Shareholding Increasing”,the market effect will become worse,and the investors are more aware of its launch motives.It is also difficult for the stock price to achieve the expected boost in the short term,and the impact on long-term share prices is weak and difficult to fundamentally change the downward trend of share price.Third,the“Risk-free Shareholding Increasing” can promote corporate value in the short term.The impact on corporate financial performance is mainly in promoting revenue,and some indicators can be improved in the short term,but it has little impact on long-term performance.Finally,summarize the experience of “Risk-free Shareholding Increasing” and propose relevant policy recommendations accordingly.