A Study On The Motivation And Economic Consequences Of The "Bottom-saving" Increase Of Listed Companies

As a result of the 2015 stock market crash,from the second half of 2016 onwards,China began to increase its regulation of financial markets.In January 2018,China’s four major regulators issued a new "deleveraging" policy,and as the policy took hold,many trusts sold off their stocks,and its exit then triggered more capital to flow out of the market,resulting in a plunge in stock prices.As of 1 February 2018,the number of declining stocks expanded to200,with only one-tenth of stocks trending higher.Meanwhile,US stocks plunged again as US bond yields continued to rise,and our domestic market was also affected as volumes plummeted.Against this backdrop,many companies have launched "Bottom protection" shareholdings,in which employees of the Company are invited to buy shares of their own companies from the secondary market for a limited period of time and hold them for a period of time,with the shortfall being made up by the shareholders out of their own pockets if the shareholder’s promised return is not reached at the end of the period.Such favourable conditions make one want to explore the reasons for the "Bottom protection" shareholding increase,the impact of the "Bottom protection" announcement on the development of the listed company,and whether investors benefit from it.The "Bottom protection" shareholding increases are usually accompanied by high pledges of company shares,post-announcement cuts by major shareholders and poor performance,which Global Top is well suited to,making this thesis highly representative.This chapter explores the motives for "Bottom protection" shareholding increases from the following four perspectives:firstly,in order to convey favourable news about the company’s development to the market,the company takes advantage of the high stock price to reduce its shareholding in order to cash out;secondly,the company’s major shareholder pledges its shares at an excessive rate,thereby reducing the risk of being forced to close its position by the pledgee;thirdly,the company uses the announcement of "Bottom protection" shareholding increases to attract investors’ attention."Fourthly,the "Bottom protection" shareholding plan was used to encourage employees to increase their shareholding in the company and motivate them to work hard to maximise the interests of both the company and the employees.In terms of economic consequences,this thesis focuses on accounting performance,market performance,share pledges,shareholder reductions and employee motivation,and finds that Global Top’s"Bottom protection" shareholding increase did not have a significant impact on the company’s performance,and had a relatively short-lived impact on the share price,with little impact in the long term.This led to the use of "Bottom protection" shareholdings to reduce the risk of closing out equity pledges,which was only a temporary relief.At the same time,the announcement of the "Bottom protection" shareholding increase by the majority shareholder was immediately followed by frequent share reductions,which is very different from the declared initiative of optimistic about the future development of the company and is suspected of "fooling" the majority of investors.In terms of employee motivation,the small number of employees involved in the share increase in this article did not play an obvious role in motivation.This thesis analyses the risks of "Bottom protection" shareholdings from a number of angles: it shows investors the risks of "Bottom protection" shareholdings,and suggests how to identify such risks,reduce the negative effects of the risks and protect the rights and interests of investors;it suggests that listed companies should focus more on improving their own performance,as "Bottom protection" shareholdings can only boost share prices in the short term and have little long-term effect on the company,while taking the opportunity to cash in on the interests of investors is not conducive to the long-term development of the company;at the same time,this thesis provides a reference for the regulatory authorities to regulate the management of "Bottom protection" shareholdings and protect the interests of investors so that they will not be "fooled" by the major shareholders.