A Study On The Influencing Factors And Market Reaction Of The Major Shareholders Of The Company

As one of the most important reform in the development of China’s capital market, the split share structure reform aimed to unify the interests of all shareholders and improve corporate governance mechanism. Meanwhile, when previously restricted shares began to be tradable, the behavior of major shareholders has been significantly changed and their stock trading became prevalent. Although regulatory authorities has developed policy framework to discourage block sale of stocks and encourage buying stocks by major shareholders, large shareholders are motivated to take adjustment to reach their ownership equilibrium. As a result, stock market began to analyze and react to the signals sent by internal stockholders.On the basis of previous research, this paper proposed a comprehensive analytical framework to study on transaction by large shareholders using both aggregated and corporate data. We find that internal large shareholders have stronger motivation to sell than to buy. Aggregate selling by large shareholders is affected by new-added tradable stocks, market liquidity, economic situation and relative valuation, while aggregate buying is mainly affected by economic situation and relative valuation. Large shareholders definitely have ability to obtain excess returns through their internal information. Results using corporate sample show that transaction by major shareholders is significantly affected by property right, control right, corporate performance, corporate governance and market valuation. Market reacts positively to high corporate fundamentals and low market valuation after announcements of transaction by large shareholders.Above all, we suggest that authorities should promote more severe supervision, make differential policies and use tax instruments so as to ensure legally transaction by large shareholders.