Research On The Motivation And Consequences Of Specific Shareholders’ Illegal Reduction Under The Background Of New Stock Reduction Regulation

After the split share structure reform,the reduction of shares has become a new way for shareholders of listed companies to profit.However,China’s transaction supervision is relatively lagging behind,which needs to be further improved.The stock market chaos in 2015 accelerated this process,and the CSRC has adopted strong regulatory measures for three consecutive years.Among them,the ‘Several Provisions on the Reduction of Shares by Shareholders of Listed Companies,Directors and Supervisors’ issued in 2017,for the first time included shareholders who held prepublic offering shares or non-public offering shares despite their low shareholding ratio.Previous literature focused on the issue of major shareholders’ reduction,ignoring some specific shareholders holding special shares.With the advent of the era of full circulation,the contradiction between tradable shares and restricted shares has become prominent.In addition,since illegal reductions still occur from time to time,this paper takes the case of illegal reductions of specific shareholders of Wu Xi App Tec in 2021 as the research object,and studies the motivation and economic consequences of illegal reductions by shareholders holding specific shares under strict institutional background.The study found that the specific shareholder involved in the case is institutional investor,and also person acting in concert of the actual controllers of the company.After further analysis,the following conclusions are drawn: in terms of motivation,the violation of the commitment not to disclose the reduction plan in advance is the direct cause of this violation;in this case,the shareholder’s reduction is the withdrawal of institutional capital,and for the maximum capital gains,there is also an incentive to implement illegal reduction.In addition,the ownership structure of listed companies is too dispersed,failed to do a good job in investor management,system defects and low violation costs are also the incentives for illegal reductions.In terms of consequences,the first is to trigger a negative market reaction in the short term,but the degree of reaction at different time points is different,and the market reaction caused by the result of violation punishment is significantly stronger than that at the moment of the incident.In the long run,illegal stock selling may also lead to weak long-term market performance of the company’s stocks,but it also makes the stock valuation more reasonable.Secondly,in this case,the stock change will also affect the stability of the company’s control rights.Third,it has not been found that the illegal reduction of specific shareholders has significantly affected the company’s performance,but has led to a decline in corporate value.Fourth,after testing the long-term market reaction,it is found that the case event has indeed brought long-term significantly negative excess returns to the company’s stocks.The return on capital that other shareholders of the company can obtain by selling stocks has shrunk significantly,and the interests of shareholders have suffered great losses.Based on the above,suggestions are put forward: firstly,listed companies and their specific shareholders should fully understand the will of the regulators,responsibly attach importance to the reduction of compliance;secondly,regulators need to further clarify the level of reduction regulations and enhance the comprehensibility and operability of reduction rules.Finally,investors should rationally view the reduction of shareholders,pay attention to value investment,and reduce blind follow-up.