Analysis Of Gains Or Losses In GEM Companies With High Transfer

Chinese Growth Enterprise Market(GEM),a securities exchange market which is considered as a supplement to the main board,has gone public in October 2009 in Shenzhen Stock Exchange.After more than seven years development,the GEM has its own label,such as “high transfer”distribution Policy,the lock-up period of restricted shares and so on.Therefore,based on foreign dividend policy theory and the actual situation of Chinese dividend policy,this thesis adopts the method of case study to illustrate the real reason of "high stock dividend”in the case company Wu Tong Holdings,and then will put forward the relevant countermeasures according to the influence of the "high send".Through the vertical comparison of the case company's situations after its listing on the GEM,it unfolds that "high transfer" of the company relates closely with the sufficient capital reserve,and IPO over the raise is the basis of its "high transfer".Meanwhile,through the case study and horizontal comparison between Wu Tong Holdings and the situation of the industries,it reveals that high transfer of Wu Tong Holdings benefits from relatively high stock price and small share capital.After the transfer,it can decrease the stock price and lower the threshold for market access,increase the participation of small and medium investors and stock liquidity.On the other hand,expanding the size of the stock can reduce the risk of malicious mergers and acquisitions as well as contribute to creating a bigger and stronger company.According to the governmental policy,it will impose 20% of the personal income tax from cash dividends,for the major shareholders,it means that a considerable amount of interests will flow away.China has not collect tax from capital gains,which will accelerate the proposing of the high transfer program.The reasons above only relate closely with the transfer of shares,but the matter of when the " high transfer " distribution program will be proposed is inseparable from the relative concentration of the company's equity system.If a company is controlled by major shareholders,the company's dividend policy will be in their favor.Through the study,it reveals that Wu Tong Holdings chooses to carry out high transfer distribution program before restricted stock circulation and continuously sends the good news,which means that it aims to raise the stock price by marketing hype and paves the pay for its reduction of holding-shares,and eventually achieves the purpose of filling in their own pockets.Then the thesis studies the excess rate of return of the indicators and finds that the overall excess rate of return is positive after a period of declaring of the "high transfer" distribution program,which indicates that high send is welcomed by the market for the short term.The excess rate of return appears a maximum value after a few days of announcing of the "high transfer" program,which demonstrates that hyping of high transfer is profitable.Along with the lengthening of time,rate of excess returns tends to be flat,which shows that the positive effect of "high transfer" is relatively obvious in the early stage.And then the reaction of market alleviates which shows that investment income from "high transfer" is reduced in the long run.In general,the reasons why the GEM company has proposed "high transfer" distribution program mainly include: IPO over-financing and sufficient capital reserve fund.In addition,equity size in the GEM company is relatively smaller when compared with the same industries,stock price is relatively high.When the time of restricted stock circulation comes,it will associate with major shareholders to reduce holding-shares.Moreover,China requires no capital gains tax and company's power is relatively concentrated.Therefore,the "high send" of listed company aims to meet the price illusion of investors,its real purpose is to coordinate with major shareholders to reduce holding-shares.In order to protect the interests of small and medium investors from being occupied,this thesis offers proposals from three aspects: regulatory body,the company's managers,small and medium investors.Regulatory bodies should not only strictly control the IPO over-raising mechanism and the employing of over-raising funds,but also try to ensure the voice of small and medium investors on the board of directors,which prevents the major shareholders' abuse of power for their own profit.The company's major shareholders and managers should have a global awareness,when establishing policies,they should take the company's long-term development into consideration,then small and medium investors as well as themselves can benefit from the policy.At the same time,small and medium investors should also rationally recognize the "high transfer" phenomenon,enrich their own professional knowledge.In addition,personal understanding should be followed with the transfer policy and avoid following suit.Only in this way can we promote the healthy and steady development of the GEM market.