A Study Of The Behavior Of Major Shareholders In Related Party Transactions After The Split Share Reform

After the split share reform, both the large and small shareholders appear to have the same interest basis, resulting in a change in the major shareholders'motivation. Related transaction is an important channel through which major shareholders"tunnel"or"prop"the listed companies. Therefore, with the target of examining the impact of the share reform on the behavior of major shareholders and the related effect, our study has been focused on the following two issues: a) How has the major shareholders'behavior changed since the split share reform, in other words, what are the differences between the related transactions happened before and after the reform? b) What effect have these changes caused on the performance and the share price of listed companies?Firstly, we theoretically analyze the logic of the motivation change of the major shareholders after the share reform, and conclude that to achieve their goal of maximizing benefits, the major shareholders turns to show an incentive to support the company's performance, and further a higher secondary market price after the reform, instead of tunneling the listed companies through related party transactions, because the stocks in their hand start to be tradable.Next,we propose hypotheses through a case study and a descriptive statistics of large sample,and empirically test whether the hypotheses are grounded. Our logic hypotheses mainly include the following:Hypothesis 1: Before the share reform, the size of related party transactions are related to asset size and financial leverage, but not to company performance and stock price; After the share reform, company performance and stock price begin to affect the transaction size significantly, and also the variables of whether it's the year for the company to complete reform and the year large shareholders stock become tradable;Hypothesis 2: After the share reform, listed company's performance is correlated with the industry cycle factors, the competitiveness of companies, related party transaction size, the share reform factors, and corporate governance;Hypothesis 3: After the share reform, the stock price is positively correlated with the related party transaction size, whether it's the year of share reform and the quantity of major shareholders'stock which become tradable.The empirical results show that, Hypothesis two is well established and Hypothesis one and three are partially grounded. After the split share reform, major shareholders began to support the performance of listed companies by equity transaction, but its effect on performance improvement is not significant. equity transactions are especially frequent in the year when the restricted shares are released, and meanwhile the secondary market price are significantly higher. Assets and commodity transactions (daily purchase and sales) are also common after the share reform, using which large shareholders improve the corporate performance and raise the stock price. Besides, the asset transactions are less characteristic among different industries, indicating the occurrence of asset transactions are not entirely out of business needs, it is somehow major shareholders'tool to manipulate the financial results. There is no significant change shown in large shareholders'motivation in daily related purchase and sale. In addition, the occupation of fund by the large shareholders began to have negative value after the share reform, and our model shows that amount of funds occupied has a significantly negative correlation with the corporate performance which show the propping tendency of the large shareholders from another angle.According to our research conclusions, we believe that the focus of politically monitoring after the split share reform should the on the following aspects: First, the long-term profitability and fair pricing of the assets traded between the major shareholder and listed firms, and related information disclosure; Second, the restriction of the amount that can be traded by the major shareholders, especially during the time of transactions occurring; Third, the assurance of small and medium investors'voting right; Four, the regulation of other interested parties associated with major shareholders.