A Research On Executives' Selling Behavior Of Chinese Listed Companies Based On Investors Sentiment

It was in June of 2015 that the Shanghai Composite Index rushed to 5000 point, but, after that, rapidly dropped to 3373.54 points in almost half of a month. In only half a year, Chinese A-share stock market experienced the period of mad cow to crash. Contrary to insiders who sold stocks at high points, individual investors purchased more. The China Securities Regulatory Commission announced on 8 July that big shareholders and senior executives selling the shares of their own companies in secondary market would be banned in 6 months. As big shareholders and senior executives of public companies play important role in stabilizing capital market, the problem of insider holdings was pushed to the forefront once again. Therefore, in this paper, the reasons of the listed company executives selling shares are explored and analyzed. As the different basic listed companies institution and regulatory policy environment of small-and-medium sized board, main board and GEM in the a-share market, they are discussed in this paper respectively. In the end of this article, related suggestions are put forward in view of the investors and regulators respectively.Insider trading was researched abroad many years ago. Insider included big shareholders and executives. The reform of the shareholder structure was carried on in China in 2005 when non-tradable shares were allowed to trade for the first time. Only after that, big shareholders trading stocks was focused as an academic problem. And most of the current research achievements in the field of insiders' selling behavior in China background the reform of the shareholder structure, such as Ba Shusong (2008), Cai Ning and Wei Minghai (2009), and so on. It was until 2009 that Chinese GEM set up, executives selling behavior as one of the research problems began to raise concern widely. Scholars began to study them and puts forward proposals for policy regulation, such as Yu Linhai (2012), Chen wei & Wu shinong (2013).However, the basic completion of the reform of the shareholder structure in 2007 and a ban in 2010 related to insiders of listed companies in GEM selling shares in short time failed to stop a bigger selling wave surges in 2015. The reason why predecessors' studying results disabled as to the selling wave is that the previous studies failed to notice the investor sentiment as an important factor probably. The selling wave surged at the moment of investor sentiment peaking in 2015. Executives of listed companies caused attention even more than the large shareholders in the crash. And previous studies failed to quantize the investor sentiment as executive holdings cause. Therefore, this article is based on investor sentiment, and integrated various factors on the selling behavior of listed companies. The general a-share market, small-and-medium sized board, main board and GEM were carried on the regression analysis respectively. Research purposes of this paper mainly included as follows. First, what are the main influencing factors of the executives'selling behavior and whether the executives value macroeconomic situation, the corporate profitability, the development potential and corporate governance determined by the company itself? Second, whether investor sentiment is the key factors of many influencing factors? Third, whether there is the phenomenon of earnings management before executives selling stocks, and the earnings management level has an important impact on the number of selling stocks? Fourthly, who is the leading role in the selling wave? What is the difference between executives'selling behavior of small-and-medium sized board, the GEM and main board?In this paper, the data mainly comes from Wind database and CSMAR database. Data was analyzed and processed in EXCEL (2010), R (2013 a) and STATA 12.0. As to constructing Chinese a-share market investor sentiment index, reference the relevant indicators selection of Zhu Bo (2015) and the modeling method of Baker-Wurgler(2006).The extended Jones model of Lu Jianqiao(1999) was used to construct earnings management index. Use the method of multivariate regression analysis to discuss the influencing factors of executives' selling behavior of listed companies on Chinese a-share market, and small-and-medium sized board, main board and GEM listed company were examined respectively.This paper is divided into five parts. The first chapter is introduction, mainly introducing the research background, the significance of this paper and the empirical research methods. And it also pointed out the breakthrough and innovation in this paper. Chapter 2 is literature review, including both home and abroad related research literature from the aspects of investor sentiment, restricted stocks, macroeconomic situation, surplus management, executive equity incentive effect, equity structure, financial management, governance structure, policies impact and so on. It also makes a comment about these literatures.In Chapter 3, it explained the general thinking of this research at first. After that, it puts forward the research hypothesis. As there is no ready-made index data measuring investor sentiment and earnings management level, they must be built at first. So it explains the modeling method of investor sentiment index and earnings management level index. Finally it illustrates specification data sources. The next chapter goes on empirical analysis based on this chapter. Chapter 4 is the part of the empirical analysis. First of all, it carries on t-test to earnings management index to verify whether there is earnings management before selling stocks. Under the condition of the presence of earnings management, the earnings management can be picked as one of the explanatory variables of the final regression model. Summarize other factors affecting executive's selling behavior for variable selection, and then constructs executive motivation regression model. Then, the samples are processed by simple descriptive statistics and analysis. After that, it goes on correlation analysis of the variables involved. It comes to multivariate regression analysis and gets the empirical conclusions at last.Chapter 5 includes conclusion and policy recommendations on the base of this research. It summarizes the practical significance of the empirical results and puts forward relevant opinions and suggestions. Finally, the shortcomings of this article and further research direction are put forward briefly.The results of this paper showed as follows. First, the executive' selling behavior characteristics and influencing factors Of different board are not identical. There is insider phenomenon in some boards. Second, selling behavior of executives is affected by investor sentiment to a large extent. Third, there is an earnings management phenomenon before executives selling stock, but the earnings management level and the volume of selling stocks did not show significant correlation. Fourth, the executives of listed company in small-and-medium sized board lead selling stocks, and the volume is the biggest in the three parts. Selling stocks is the most desirable for executives in the GEM whose intend is most obvious, but due to tighter regulation, they failed to become the backbone of the army of selling. The selling intention of listed company executives in main board is not strong, because most of the main board companies are state-owned to some extent.The innovation points of this essay as follows. First, as to the sample, it selects a-share market as the research object, which is a large sample. Domestic researches before were almost all about the GEM and used relative small amount of data, which is applied restrictedly in practical situation. This paper compares the main board, small-and-medium-sized board and the GEM board, which is the first in the related field. Second, the time span is large, from January 1,2008 to July 1, 2015. It has experienced a complete cycle including the slump, stabilizing, fluctuation and bull. So it has a strong guiding significance. Last but not least, using principal component analysis (PCA) to construct the investor sentiment index will quantize the stock market background, which makes the method of empirical analysis used in the comparative analysis of macro level and company level in the same model. Before this paper, the domestic achievements apply to linear regression analysis in a short time and regress respectively in different stock market background.Shortages of this paper lie in that, due to lack of time, it failed to compare the executives reducing holding-shares to increasing, nor the major shareholders of listed companies. In addition, due to the empirical results in this paper show that the small-and-medium-sized board, the GEM and the mainboard insider behavior effect are different. So the original plan is to build the surplus management model according to insider behavior effect of different sectors to explore if the surplus management to cater to the effect of investor sentiment. But because time is limited, which can be left to further in-depth study.