Institutional Ownership,Features Of Ultimate Controllers And Large Shareholders' Selling

After the Split Share Reform,a large number of non-tradable shares owned by large shareholders lifted in succession.Their selling motivations released at that time,which marked the commencement of large shareholders' selling.However,because of information asymmetry and imperfection of internal and external supervising mechanism,large shareholders' selling is not as simple as regular share dealing.The process of selling is always accompanied by some behaviors that cater to the interests of large shareholders such as market timing,earnings management,performances illusions,etc.After a series of capital operation,informed large shareholders make their piles but uninformed minority investors suffer huge losses.The emergence of institutional investors has set up a communication bridge between large shareholders and minority shareholders,which abates the information barriers between them.Institutional investors not only have rational investment ideas,specialized knowledge and talent advantages,but also have effects of economic scale and advantage of speaking right brought by the size expansion of the stake.Therefore,it is very important in practice to study whether the participation of institutional investors affects the large shareholders' selling.Using a sample of large shareholders' selling events from A-share listed companies in Shanghai and Shenzhen stock markets between 2012 and 2016,this paper investigates the influence of institutional investors' shareholding on the large shareholders' selling and study whether this relationship is affected by features of ultimate controllers.First,this paper analyze the change pattern of excess profits before and after the selling announcement by applying event study,then investigates whether large shareholder can earn excess profits through selling and how this selling is affected by the institutional investor' s trading behavior and how about its influence mechanism.Then,the regression analysis method is used to study the influence degree of overall shareholding scale and heterogeneity of institutional investors on the large shareholder's selling.Considering that enterprises show different governance characteristics under the different features of ultimate controllers,the paper further examines how features of ultimate controller affects the relationship between institutional investors' participation and large shareholders' selling.The findings show that,(1)Large shareholders' selling do earn excess profits through selling,and the large shareholders get more profits from their selling in the companies withinstitutional investors who buy more shares compared to those in the companies with institutional investors who sold more shares.The investment behavior of institutional investors affects the large shareholders' selling through the excess profit.More specifically,the buying behavior of institutional investors in state-owned companies contributes more to large shareholders' selling at higher price,and the selling behavior of institutional investor in non-state-owned companies are more likely to lower the excess profits from large shareholder's selling.(2)The overall institutional ownership is significantly negatively related to the large shareholder's selling,that is,institutional investors can effectively supervise the large shareholder's selling in general;Among them,institutional ownership concentration is significantly negatively related to the large shareholder's selling,the higher the concentration of institutional investors,the more effective they can supervise the large shareholders' selling;Independent institutional investors can play a better governance effect than non-independent institutional investors,their ownership is more negatively associated with the large shareholder's selling than the latter;stable institutions can play a better supervise effect than non-stable institutions,their ownership is more negatively associated with the large shareholder's selling than the latter;The supervisory role of institutional investors' holdings on block holders is more obvious in non-state owned enterprises,and state-owned property right of ultimate controllers limits the effectiveness of institutional investors' governance.