Study On The Motivation And Economic Consequences Of The Major Shareholders Of Kehua Holdings

China Securities Regulatory Commission started the reform of share splitting reform in 2005.This reform promoted prosperity and development of China’s stock market from2005 to 2007.The share splitting reform was deepened step by step,the restricted shares were gradually lifted,the era of full circulation of the stock market is quietly coming,and new problems are gradually emerging.Major shareholders can not only profit through dividends,but also take huge profits by reducing their holdings in the secondary market.The frequent and disorderly liquidation type reduction behavior of major shareholders not only led to the stock price collapse,caused harm to minority shareholders’ interests,but also created huge panic to the market and affected the stability of the market.In order to make the market stable and protect the benefits of minority shareholders,the CSRC issued successive regulations from 2015 to 2017 to limit the reduction of major shareholders.The new rules on shareholding reduction require major shareholders to disclose the shareholding reduction plan in advance,breaking the previous old mode of "reduction before disclosure",and innovatively realizing the new mode of "disclosure before reduction".On the basis of guaranteeing the transfer of stock rights of major shareholders,the new regulations play a certain role in reducing the damage of the minority shareholders’ interests.But can the new rules fully protect the interests of minority shareholders? Why should the major shareholders reduce their holdings? What impact will it have?This article takes Kehua Holdings as the case study object,analyzes the motivation of its major shareholders’ divestment behavior from 2019 to 2020 on the basis of having gained some understanding of the industry’s development status,and exploring the economic consequences brought by the major shareholders’ implementation of liquidation-type divestment.This paper draws the following conclusion through studying the liquidation and reduction of the major shareholders of Kehua Holdings.In terms of the motivation of the reduction,The analysis of this paper discovered that:At first,The company’s fundamentals is determined by financial performance.The major shareholders will judge the operating status of the company according to the financial level,In the industry,With the situation of deteriorating financial performance,Two major shareholders implemented their holdings;next,Equity structure is an important factor affecting the reduction of non-controlling major shareholders,The shareholding structure of Kehua Holdings is relatively concentrated and further concentrated,To reduce the infringement of their own interests,Major shareholders decide to reduce their holdings;last,Major shareholders,as rational economic people,Even when the stock price is not the highest,As long as the proceeds of the reduction are above the cost,Major shareholders will also reduce their holdings.In terms of the economic consequences of holdings,this paper found that large shareholders for the first time will cause short-term market performance fell significantly,but with the increasing number of underweight announcement and all kinds of good news,make the reduction of the influence of short-term market performance gradually smaller,the market for reducing stock price decline caused by digestion faster,but in the long run,share prices have fallen significantly.In terms of the company,the reduction brought about the negative influence on the company’s investment,financing and business activities.The reduction also led that the equity becomes more concentrated and the equity checks and balance become lower,the number of directors decreased,and deteriorated the corporate governance environment.In aspect of the impact on minority shareholders,through reducing their holdings major shareholders have achieved long-term excess returns,and the earnings per share are also declining significantly.Major shareholders liquidate their positions through continuous reduction of holdings,which also leads to the continuous decline of the stock price.Minority shareholders have to bear this risk,which seriously damages the minority shareholders’ interests.The illegal reduction behavior in the process of reducing holdings infringes on the rights of minority shareholders seriously.The research on Kehua Holdings not only enriches the case study about major shareholders reduce their holdings,but also make feasible recommendations to relevant departments,enterprise and minority stockholders from the result of this research at the same time.These advice will not only help investors to distinguish the motivation of major shareholders reduce their holdings,improve minority stockholders the ability of risk prevention,but also make the relevant laws and regulations more prefect,stem major shareholders ’ behaviors of entrenchment,facilitate the stock market become more fair,achieve healthy development.