The Protection Of The Interests Of Minority Shareholders In Insider Reduction

With the opening of the era of full circulation of shares after the share reform,the way for shareholders to obtain income is no longer limited to the original M&A or related party transactions,but has been directly through the secondary market to reduce shares to carry out rapid cash out.Although there is no doubt about the behavior of reducing shares,the high stock price naturally produces the demand for cash,but in the process of reducing shares,because the insiders have the advantage of information,they often manipulate information disclosure and other behaviors to expand the price difference income of reducing shares.Market manipulation and other phenomena not only disturb the market order,resulting in violent fluctuations in the short-term market.In the long run,in the case of poor business operation,insiders are still cashing out and leaving the market,which aggravates the poor performance and leads to the decline of market value,which strikes the confidence of external shareholders in holding shares and seriously infringes the interests of minority shareholder.Taking Lecron Industrial Development Group Co.,Ltd.listed on the gem as an example,this paper studies a series of means and ways in the process of reducing its holdings,explores the motivation of insider reduction and its impact on small and medium-sized shareholders,so as to provide feasible and practical suggestions for the regulatory authorities to regulate insider reduction,so as to put the protection of small and medium-sized shareholders’ interests in place.This paper is divided into seven chapters.The first chapter is the introduction,which summarizes the main purpose and content of this article,sorts out the background and value of this case,expounds the research content and framework,and summarizes the main contributions of this paper.The second chapter is literature review,combing the causes and consequences of the reduction,and the protection of the interests of small and medium-sized shareholders in the reduction,and through the review leads to the focus of this study.The third chapter defines the concepts of insider trading,high transfer,equity pledge and so on,which paves the way for the following case analysis.The fourth chapter combs the development process of the relevant provisions of China’s reduction in recent years,and analyzes the historical situation and the latest status of the reduction in China’s capital market.The fifth chapter is the background of the case.It introduces the transformation of the company and the capital operation,and reviews the three significant reduction processes of the company.The sixth chapter is the case study.After analyzing the reasons of the reduction,the paper makes an in-depth study on the damage of the reduction to the shareholders’ interests from the perspectives of short-term market reaction and long-term performance.The seventh chapter is the research conclusion,suggestion and prospect.Through research,it can be found that the company’s reduction has the characteristics of high frequency and small amount,and frequent cash arbitrage has caused certain pressure on the market,and many accompanying manipulation means provide a better cover for the reduction.The existing laws and regulations are not enough,which makes the profit of insider cash out far exceed the cost of violation.The company’s operating situation is not good,and the insider’s reduction not only makes the market short-term pressure,but also aggravates the company’s performance decline in the long run,and finally transmits to the external small and medium-sized shareholders.The main innovations of this paper are as follows:First of all,based on the previous research focus,this paper further broadens and increases the research on the behavior of non controlling shareholders and senior executives of listed companies.In recent years,the high-level cash out of insiders of listed companies often occurs,and a series of problems have aroused the attention of scholars and regulators.However,at present,the relevant literature focuses on the group of actual controllers,while this paper expands to include the stakeholders of non controlling shareholders such as directors and financial directors,which helps to deeply understand the impact of insider reduction on the interests of small and medium-sized shareholders.Secondly,the case study is from the perspective of the protection of the interests of small and medium-sized investors to study the behavior of insider reduction.The existing literature mainly studies from the perspective of "the impact of shareholders on the company",such as hollowing out and other phenomena.On this basis,this paper increases the research on the interests of small and mediumsized shareholders,and comprehensively reflects it through the research on shortterm market reaction and long-term financial performance analysis.Finally,the case presented in this paper is more suitable for the current situation of the capital market.Different from the past clearance reduction cases,the way of reduction in this case is not only "good-one-time delivery",but also a long-term flow of reduction.The huge reduction exists,but is rare.The high-frequency reduction is relatively more,more hidden and damages the interests of investors.In the current capital market with more restrictions on reducing holdings,in order to avoid regulatory restrictions,more companies adopt this way of reducing holdings,so this case is more meaningful.This paper also has some shortcomings.First of all,due to the fact that all the data obtained in this paper are public and lack of field visits,the understanding of business operation in the case is not deep enough,and there are inevitably limitations in the analysis.In the future,we can continue to follow up the company’s relevant capital operation behaviors,further explore cases and extend areas.Secondly,although the suggestions in this paper are analyzed with specific cases,they still need to be improved in practice.In the future,we should pay close attention to the adjustment of policies and regulations and the latest trend of the market,refine the suggestions and countermeasures,and improve the operability.