An Empirical Research On Market Effect Of Executives’ Selling Of Growth Enterprise Market In China

Taking the firms whose executives have sold shares in China Growth Enterprises Marketfrom Nov1,2010to Dec31,2013as the research object, this study examines the marketreaction to executives selling announcement and its determinants with event study andmultivariate regression. We find that the market reaction is significantly negative to the sellingannouncements of executives. The cumulative abnormal return (CAR) was in a rising trendbefore the selling date, and increases more as close to the selling point. After selling, the CARimmediately turn into a downward trend, and reached the lowest point on the announcement dateOverall, the CAR presents a inverted v-shaped change trend. On the announcement date,investors react more negatively to larger sales, worse performance companies and lower growthcompanies. Then, we compare the market reaction to the GEM board listed company executivesselling with small and medium-sized board, and find no significant difference between the twoboard, before and after the reduction of market volatility executives almost unanimously.Compared with Shanghai A shares, the GEM market have greater uncertainty. GEMexecutives’ large number of reduction plays a role of early warning for the future development ofthe companies. We hope the market investors and relevant regulatory authorities could have abetter understanding of market effects of GEM executives’ selling through this study.