The Research Of Market Effect Of Manager’s Share Transfers In Chinese Listed Companies

Executive shares holding increase or decrease refers to the behavior of executives buying and selling stocks in the secondary market. In western developed capital markets, all of the shares can be traded in the secondary market, the phenomenon of the executives of change in holding is relatively common, but relevant information is needed to be disclosed when the number of trading more than a certain percentage. Compared with Western countries, changes in holding of our executives shares started to develop a little late, regarding past the Non-Tradable sharemode, the executives of listed companies or shareholders’ equity cannot be in circulation in the secondary market, it is usually to assess the wealth they have according to net assets, which is also the price basis when executives or major shareholder equity transfer.It directly leads to that the stock price cannot cause extreme attention of the owners or executives of listed companies, because it seems wealth of the largest shareholder or executive and the level of stock prices are not relevant. However, since the split share structure reform, the shares held by large shareholders or executives can gradually flow in the secondary market, stock prices and their wealth is increasingly relevant which becomes their pursuit of the interests of the core objectives; it is to say the way that they obtain benefits changes significantly.It can be said to be charming regardless of the executives increasing or decreasing the holding of equities when the executives changes their holdings. On the one hand, executives are trying to pass a good market signal through its own overweight holdings, expect stock prices to return to a reasonable position, executives underweight holdings is even showing exponential growth; on the other hand,due to that the executives can grasp a more accurate and more timely information than the shareholders of the Company as well as ordinary investors, their overweight or underweight naturally attracts market-wide attention. At present, both practitioners and theoretical circles have given enough attention on this.Referring to Foreign research since the1960s and1970s, insider trading become the focus of attention of Western academia, the so called insiders here, including all insiders who can access to company information, that are shareholders, directors, supervisors, managers, etc. Studies have focused on internal use inside information to obtain excess returns. As to domestic research, before the formal implementation of our new "Company Law", the executives of listed companies during the duty period may not be transferred, means that by2006domestic scholars research on senior management holding changes has been still blank, and instead focused on the inspection of illegal insider trading, such as Shi Yongdong and Jiang Xianfeng’s(2004) research on all the stock that have been punished for insider trading,, that the average price of the stock rises due to insider trading, the price volatility is also affected.Due to the relative concentration of China’s equity, domestic scholars first put attention to the large shareholders, concerned about the private benefits of the shareholders, tunneling behavior, insider trading and other research, for example, Zhang Xianjian and Guo Lan’s research (2007), investigating the tunnel effect from the perspective of earnings management, they thinking that earnings management of the largest shareholder decreasing enterprise value, meanwhile completing the predatory interests of minority shareholders which leading outside investors to wrong decisions, resulting in reduction of enterprise value, resource allocation, corporate reputation and future financing capacity. Executives of change in holding is although widespread concerned, relatively speaking, they are much lower than the biggest shareholder on the quantity and frequency of changes in holding, still few study focus on executive change in holding.This article chooses the announcement of executives change in holding in the secondary market as a research object, selects the data of executives changes in holding from2005to2011, with the method of combining theoretical and empirical Analysis, investigates the main motive of executive changes in holding and the resulting market effects.This study is divided into five parts, major elements of each part as following:Part I:Introduction. First it is introduced the research background and significance of the article; then the research ideas and research framework and the logical framework map is also introduced, which makes the article more clear and easy to understand.Part II:Literature Review.It is being review of issues involved in this paper, based on related study achievements introduction, leading to the direction this article focus on. First, due to insider trading becoming a focus of attention of Western academia since the1960s, and the executives of listed companies are the major insiders, therefore, this article conducts review from legitimate insider trading perspective by focusing on executives profitability of increase or decrease in the holding, executives of information superiority as well as the effect on Corporate Governance; Second, due to fewer domestic literature, and to a certain extent the evident similarity of the holdings of executives shares and enterprise repurchase of shares, although they differ from sources of funding, the impact of ownership structure and the basis of laws and regulations, still it can be inspired from the related study of stock repurchase, this article draws on a representative market effect of share repurchases, sorts them out, and conducts a brief reviewPart III:theoretical analysis.First this article defines the executives of listed companies, and elaborates related theoretical basis of signaling hypothesis and the market timing hypothesis on which this article relies. According to research needs, it also defines the concept of executive changes and analysis the method of executives changes in holding and the relevant laws and regulations such as, the "Company Law", the "Securities Act", and" directors of listed companies, supervisors and senior the shares held by management and changes in the rules " which regulates differently on executives changes in holding.Secondly, analysis on the advantages and motives held by the executives of change in holding. In this process, we find:the influence of the executives in the stock price is better than the other shareholders or outside investors, including executives of the equity advantage, the advantage of insider information and cost advantages. When executives choose to overweight or underweight the shares, there are a variety of motives, in general, overweight or underweight the shares can maintain the stability of the stock price, for example, in order to achieve additional allotment refinancing program, by holding to consolidated control of the company; when being optimistic about the future development or air company’s future, arbitrage, the optimal ownership structure, facing financial pressure.Part Ⅳ:Empirical Analysis on the market effects of executive changes in holdings.This section focuses on the use of event study methodology, selects of the market model to estimate the normal rate of return, estimated period is selected by150days, then calculates cumulative abnormal returns CAR before and after the announcement of the executives increase or decrease, to test the existence of a signaling effect of senior management changes in the holding announcement to between2005-2011, which approves:①executives overweighting shares holdings on the announcement date generates a positive market effect, before and after the announcement cumulative abnormal returns CAR was down then up the V-shaped trend, in addition, after breakdown of227cases of executives overweight holdings, it is obtained the bigger the intensity of executives overweighting holdings, the stronger the positive signal to the market, especially under the background of bear market;②executives underweighting shares holdings on the announcement date generates a negative market effect, before and after the announcement cumulative abnormal returns CAR was up then down the V-shaped trend. In addition, after the breakdown of the209executives reduction case, the greater the intensity of the reduction, the stronger bearish signal to give the market; executives reduction in the unilateral increase of the bull market fails bearish market effect, in a single side fell of the bear market, negative market effect is not obvious;③the information of executive holdings in domestic A-share market always get leaked in advance.Part V:Conclusions and policy recommendations.Regarding observation and analysis of the specification and the empirical part of this article an overview of theoretical explanations and five policy recommendations is given, three different dimensions to the conclusions as:①rational use of executive holdings of a market effect, and to safeguard the interests of the listed companies;②odinary investors,small shareholders and medium shareholders should pay more attention to reduction behavior of executives.③to develop a strict regulatory system on the reduction behavior of executives of listed companies, including executives holdings announcement system, to extend the executives trading interval:The main contribution of this article:1. Since there are so few articles have analyzed the issue in the point of view of Announcement about reduction or overweighting shares behavior of executives.As the relative concentration of China’s equity, research mainly concentrated in the largest shareholder, by contrast, domestic scholars hold executive changes in the study is relatively rare. This article utilizes executives shares increase or decrease in holding in domestic A-share market as the case study, use of event study empirical research on the effect of market held by the executives of change, selected study sample consisted of the announcement of executives shares increase or decrease in domestic securities market between2005-2011. This paper studies the effect of increase or decrease of shares held signaling and response pattern, changes in different intensity and different periods of executives holding the announcement signaling effect.this paper enriches the research.2.This article helps to deepen the understanding of executives trading behavior for domestic investors.The inadequacies of this article:1.Samples are few. The selected sample in this article is subject to the information designated by the CSRC website announcement, although since the new "Company Law" allows executives to sell their shares on the secondary market, which showing exponential growth, but the actual announcement is very few, same as executives overweighting in holdings; as well as the reasons for the limited information gathering capabilities, the fewer number of samples of this article, to some extent, may affect the results of this study, a direct result of the one-sidedness and limitations of the empirical object data, resulting in the lack of empirical results convincing.2.This paper only analyses issues in the point of view of short market effects.