A Research Of Timing And Market Impact Of Controlling Shareholder’s Reduction Of GEM Companies

China’s Growth Enterprise Market(GEM)has developed rapidly since its official opening in October 2009.GEM’s transactions are extremely active and the amount of listed companies reached 1000 in August 2021.The GEM provides access to financing and development space for entrepreneurial enterprises,small-and medium-sized enterprises and high-tech industrial enterprises.External investors have strong willingness and enthusiasm for GEM.However,they didn’t get paid as expected.In November 2010,the first batch of original shareholders’ up-locked shares expired,and the GEM have been suffering massive selling.Several rounds of reductions have seriously dampened small and medium shareholders’ motivation and participation for transactions.Controlling shareholders have information asymmetry problems and principal-agent problems with small and medium shareholders.They often conduct insider transactions in pursuit of personal interests,which seriously infringes the rights and interests of small and medium shareholders.And it is not conducive to the long-term healthy development of the GEM.Therefore,it is of great theoretical and practical significance to study controlling shareholders’ reduction in GEM listed companies.Existing literature shows that insiders such as major shareholders of listed companies have strong control ability in reduction and high accuracy in choosing the timing.There is a close relationship between the controlling shareholders’ reduction and information disclosure.Also,the reduction of major shareholders has an important impact on corporate governance and the market.However,the existing researches have different standards for controlling shareholders,and most of them are case studies.At the same time,the researches of the timing and the market impact of reduction are not closely connected,ignoring the effect of the timing and content of information disclosure.Thus,this paper firstly defines the concept of controlling shareholders and information disclosure,and includes shareholders who have an acting-in-concert relationship with controlling shareholders in the research,and then puts forward hypotheses based on information asymmetry theory,signal transmission theory,principal-agent theory and insider trading theory.Secondly,using the reduction of controlling shareholders of GEM-listed companies from July 2017 to June 2021 as the sample,this paper constructs a model with the event study,empirically examining the changes in the cumulative excess return of the sample companies before and after the reduction.Thus,determining whether the controlling shareholders make a profit by reducing its holdings,and whether its holding reduction behavior has obvious timing.Then,comparing the changes in the stock price of listed companies with the changes of the Growth Enterprise Index(GEI)in the same period,this paper explain the market impact of controlling shareholders reduction.Finally,this paper make empirical tests of the impact of the timing and content of information disclosure on the controlling shareholder’s reduction by constructing a multiple linear regression model.The results show that in GEM-listed Companies,(1)After the reduction,the cumulative excess return of the listed company changes from positive to negative,and the controlling shareholder can make a profit by reducing the holdings.As insiders with information superiority,they manage the timing of the reduction;(2)The reduction of the controlling shareholder’s holdings has a certain negative effect on the company’s stock price and the market.The fluctuation of the listed company’s stock price is more obvious than that of the GEI’s price in the same period.On this basis,the research has studied the influencing factors of controlling shareholder’s reduction,finding that the controlling shareholder’s reduction ratio is positively correlated with the proportion of shares held before,and it is negatively correlated the size of the company and the release of a good performance forecast after the reduction.The timing and content of information disclosure have an important impact on the controlling shareholder’s reduction.