A Study On Influence Factors Of GEM Companies Restricted Shareholders’ Reduction

To meet the needs of economic development and establish a multi-level capitalmarket, China founded GEM specifically for companies with high growth after small andmedium sized enterprises board. China’s GEM has received much attention, its openignited the passion of the majority of investors since October30,2009, the first batch of28companies were traded with serious speculation, there had been a high issue price,high price-earnings ratio and high over-raised funds which we called "three high"phenomenon, the following GEM listed companies intensified the phenomenon sincethen. However, many GEM listed companies’ senior executives resigned in the first yearto sell more restricted shares in advance. And since the end of2010, it frequentlyappeared the phenomenon that a large number of restricted shareholders reduced theirstock for cash, the high-intensity reduction brought much pressure to the secondarymarket, it also caused that the majority of investors suffered many losses. According tostatistics, during the first half of2014, it’s forecasted that the number of lifted shares willreached9.963billion to hit a new high in recent years, the value will be more than170billion yuan. Given such a huge stress of lifting and reduction, the study on Influencefactors of GEM companies restricted shareholders’ decreasing and the proposing ofcountermeasures are very necessary.In this paper, we will study on the restricted shareholders’ reduction of GEMcompanies which have listed for a full of year before December31,2012, investigate andverify the factors which impact the reduction.The article includes five parts: The firstchapter is the introduction, it mainly contains the introduction of background, significance,ideas and the main work and shortcomings, and proposes the future research prospects;the second chapter contains theoretical foundation and domestic and internationalliterature review, firstly it definites the concepts involved, and then describes thetheoretical basis of this paper from five aspects including the theory of insider trading, theprincipal agent theory，the theory of ownership structure, the theory of corporategovernance and the theory of growth, lastly it reviews and sumarizes the relevant foreigntheoretical literature and the domestic Non-tradable Share Reform, IPO restrictedshares,the game of restricted shareholders; the third chapter analyzes the factor ofrestricted share reduction and makes assumptions, describes the variables, data, samplesand research methods; the fourth chapter uses principal component analysis to measure the growth of the companies, and then makes a linear regression analysis; the fifth chaptersummarizes this paper and makes policy suggestions.As that the GEM has been established not long, there are not much studies on GEMrestricted share reduction, so this paper makes a strong complement to the existingliteratures. Based on the other literatures, this paper introduces comprehensive index ofgrowth, restricted shareholders’ reduction before lifting and the relative costs of restrictedshareholders as explanatory variables, across the empirical regression we find that thecompany’s growth and relative cost of restricted shareholders do not have a significanteffects with the reduction ratio, restricted shareholders’ equity ratio before reduction andthe concentration of holdings have significant positive relative with the reduction whileequity restriction has a significant negative effect. This paper explains the regressionresults, and makes a complementary research from the perspective of game theory.Finally, this paper puts forward the corresponding policy recommendations according tothe conclusions and analysis.