Research On The Insiders’ Shares Selling In The Corporate Arbitrage M&A

After the reform of non-tradable shares,the securities regulatory department of our country has opened the "floodgate" for insiders to reduce their non-tradable shares in the secondary market.Especially for the original major shareholders who participate in the IPO feast,their shareholding proportion is high.The cost of holding is low.The cashing desire is strong.And even some listed companies’ insiders reduce their holdings in violation of the regulations.In order to obtain more private benefits,some insiders of listed companies have,before reducing their holdings,manipulated the company’s surplus,manipulated the announcement of performance pre-increase,planned strategic cooperation to push up the stock price,manipulated the winning of contracts and other major information disclosure,issued " High-Paying Stock Dividends" distribution plans and M&A plans,and even manipulated the company’s stock price with institutional investors to achieve high cashing in.M&A is an effective and significant way for enterprises to optimize the allocation of resources,implement industrial upgrading and adjustment shareholding structure.However,due to the complexity of M&A evaluation process and serious information asymmetry and agency problems,M&A may become a tool for insiders to obtain private benefits.Since the stock market of our country is fond of the theme and concept hype for a long time,the release of M&A information can no doubt attract the investors’ "eyeball" of the stock market.At the same time,the insiders often do not conduct adequate due diligence on the subject matter of M&A,ignoring the real intrinsic value and potential risks and M&A integration issues.Thus it may bring hidden high goodwill dangers to the listed companies.Compared with the outside investors,the insiders have the obvious information advantage to the risk of the bursting of the goodwill bubble,which may prevent the risk of goodwill impairment.For the excess earnings on shares selling,insiders have strong motivation to sell shares by frequently merging and acquisitions to drive up the stock price,and withdrew completely before the goodwill impairment.The risk will be fully transferred to other small and medium shareholders.Therefore,it is of great practical significance to prevent listed companies from initiating M&A to cater for insiders’ shares selling.Based on information asymmetry theory,signaling theory,principal-agent theory and the theory of private interest in control rights,this thesis explores the motivation and economic consequences of M&A of Ci Xing insiders before reducing their holdings,and finds out that listed companies cater for insiders’ shares selling by initiating M&A,leading a huge risk of goodwill impairment.Because of the information asymmetry and the principal-agent problem,the insider has enough motivation and ability to manipulate the listed company’s arbitrage M&A.This thesis selects insiders of Ci Xing as the case subjects,analyzing the insiders’ selling behavior in the whole process of Ci Xing shares initiation and acquisition and acquisition of goodwill impairment,and studies the motivation and economic consequences of insider selling in China’s listed companies initiating M&A,so as to provide investors and securities regulatory authorities with experience and evidence for identifying the real intention of initiating M&A before the insider selling,and also help the securities regulatory authorities to implement "precise supervision" on listed companies’ M&A and insider selling,so as to better play the role of M&A and restructuring in capital market resource allocation.This article mainly uses the literature research method,the case study method and the event research method to study the Ci Xing share initiation merger caters to the insider reduction behavior.This thesis is divided into five chapters.The first one is introduction,introducing the research background.Then it expounds the significance of this thesis from the academic and practical aspects.Literature review briefly introduces the research results of domestic and foreign scholars on M&A and insider reduction.The second chapter is theoretical overview.The second chapter introduces the specific concept of insider reduction,analyzes the motivation of insider reduction,summarizes the main ways of insider reduction,and then analyzes the ways of insider manipulation of stock price from different perspectives.The third chapter is Ci Xing share insider reduction case.The third chapter introduces the basic situation of Ci Xing shares and M&A target You Tou and Duo Yi Le,then introduces the M&A process in detail,and analyzes the characteristics of the M&A,and finally introduces the situation and characteristics of the reduction of Ci Xing shares.The fourth chapter is Ci Xing share reduction before the acquisition of the causes and consequences of analysis.The fourth chapter analyzes the motivation of M&A and the reasons why insiders can reduce their shares smoothly after M&A.Finally,it analyzes the economic consequences caused by M&A in order to cater to the reduction of Ci Xing shares.Chapter five is conclusion and enlightenment.This chapter summarizes the motives of M&A,the consequences of M&A with high premium and the harm of M&A catering to the underweight,and puts forward some concrete suggestions from the angle of supervision,listed companies and investors.This thesis proposes that securities regulators should strengthen the identification and punishment of "flickering" M&A,further improve corporate governance to regulate the behavior of insiders,further strengthen the supervision of information disclosure by insiders during the reduction period,further standardize the confirmation and impairment of corporate goodwill,and guide investors to rationally view M&A and restructuring activities,so as to better play the role of M&A and restructuring in the allocation of capital market resources.In comparison with the existing literature,there are following main contributions: Previous studies mainly explore the issue of insider manipulation of stock price to meet the needs of stock reduction.Although some scholars have found that listed companies manipulate the stock price by initiation and acquisition before the insider reduction,these literatures mainly examine the impact of insider reduction on listed companies’ M&A by empirical means.Based on signal transmission theory,information asymmetry theory,principal-agent theory and control right private interest theory,this thesis analyzes the reasons and economic consequences of the insiders’ shares selling in the corporate arbitrage M&A,and expands the research on the relationship between M&A and the sale of shares by insiders through the case situation.