Study On Influential Factors Of Executives’ Stock Reduction On GEM

Since GEM started on October 30th 2009, it has been in existence for six years. GEM is set for the high-tech enterprises and other small and medium-sized companies to help them expand their financing channels and promote their development. Up to November 30th 2015,484 companies have been listed on GEM. Many companies therefore expanded their market value several times, so they have become the new force of the capital market, and have raised a lot of attention. But with high growth of the companies, there have been lots of risk. From the beginning of GEM, there have been high PE ratio, high issue price, high raise funds, which has been called three high phenomenon, and executives’stock reduction became more often. It has harmed the interests of investors and hindered the healthy development of capital market. Because it is a new thing, the research based on it are still very few, in order to explore the essence of executives’stock reduction and find its influence factors to make a contribution to our capital market, this paper take it as a starting point, combine the theoretical research and empirical research, study the affecting factors of executives’ stock reduction from three aspects, such as market, information asymmetry and executive themselves. And this paper draws the following conclusions. Firstly, the corporate market value is one of the most important factors of executives’stock reduction. GEM listed company’s earnings are high compared to the motherboard market, and the higher the price-earnings ratio, which shows that the return on investment are high, and the enterprises are more likely to enter the capital market to get profits, of course the corporate executives as a member is no exception, who help earning the investment income and at the same time, executives also took the opportunity to reduce their stock to obtain large gains. Once the market value is overvalued, namely the higher the Earnings index, the executives are more likely to obtain interests through stock underweight. Secondly, the company’s performance is also one of the most important factors of executives’stock reduction. Based on the information asymmetry, executives have more superior information than external people, so they can predict the company’s performance. When they think the performance would decline, they will make their stock underweight to get excess profit. Thirdly, the executive factor is one of the most important factors of executives’stock reduction too. The research results show that the market, information asymmetry and executive themselves are the factors influencing the executives’stock reduction. So this paper puts forward a few suggestions according to the research, including the company point, the market point, the system point and personal aspect, so as to make contribution to the healthy development of GEM and the effective operation of capital market.