Research On The Motivation And Economic Consequences Of Major Shareholders In STAR Market Choosing Inquiry Transfer To Reduce Their Holdings

Since its establishment in 2019,the science and technology innovation board(hereinafter referred to as ’STAR market’)has continued to improve institutional arrangements,support and encourage the development of‘hard-core technology’enterprises,and made a series of achievements in promoting the gathering of science and innovation industries and stimulating the innovation vitality of enterprises.To guide the shareholders of the STAR market to reduce their holdings in an orderly and compliant manner by the law and reduce the impact on the secondary market,the STAR market continues to play the function of a pilot ground for reform and has established a new inquiry transfer method to further improve the system of holding reduction through a market-based approach,in addition to the three forms of holding reduction including centralized bidding,bulk trading,and agreement transfer.On July 3,2020,the SSE issued a notice on ’Implementation Rules for Shareholding Reduction by Shareholders of Listed Companies on the Shanghai Stock Exchange through Quotation Transfer and Allotment to Specific Institutional Investors’,which has been officially implemented since July 22.The inquiry transfer is a means to implement the shareholding reduction in a market-oriented manner,with adjustments in the limitation on the number of shares to be reduced,qualification of the transferee,and information disclosure requirements.By the end of 2022,a total of 32 listed companies and 55 batches of shareholders have completed the inquiry transfer to reduce their holdings.Under the new pattern of the STAR market holding reduction system,it is worthwhile to further explore why the major shareholders of STAR market-listed companies choose the new holding reduction method of inquiry transfer and what effect the inquiry transfer mechanism will bring.To this end,this paper will analyze the motives and effects of the major shareholders’ choice of the inquiry transfer,provide a reference for the major shareholders of the STAR market to reduce their holdings,and offer suggestions for listed companies,ordinary investors,and the optimization of the inquiry transfer system.This paper adopts a single-case study approach because it investigates the motives and effects of the transfer by request for quotation for major shareholders of the STAR market,which is a "why" and "how" question and is suitable for the case study approach.To reflect the effect of this new way of holding reduction more intuitively,this paper selects two ways of holding reduction,namely,centralized bidding and block trading,for comparison in the effect analysis section.WindSun Science&Technology Co.,Ltd.(hereinafter referred to as ’FGI’)has been selected as a case study for two main reasons:First,the two inquiry transfers by FGI’s major shareholders achieved a larger scale of pre-IPO share exit,which can reflect the characteristics of the inquiry transfer in the holding reduction system;furthermore,The major shareholder of this inquiry transfer is a venture capital shareholder,and one of the main objectives of the inquiry transfer’s establishment is also to promote the orderly exit of VC capital,therefore,the case enterprise has strong typicality.Secondly,FGI is currently one of the companies with the highest number of completed inquiry transfers,so the relevant media attention is more;at the same time,the reduction party Shandong high-tech venture capital limited company is the investment body of the listed company,Luxin Venture Capital Group Co.,Ltd.,the relevant information is also more readily available.This paper firstly sorts out the process of inquiry transfer of the case company FGI.Secondly,analyzes the motivation of FGI to choose inquiry transfer from two aspects:the advantages of the inquiry transfer mechanism and the demand of major shareholders to reduce their holdings.Thirdly,compares centralized bidding and block trading,and analyzes the different effects of inquiry transfer on the major shareholders and listed companies on the science and technology innovation board to reduce their holdings.Finally,summarize the findings of this paper,and on this basis,propose research insights and recommendationsThrough the analysis of the case companies,this paper draws the following conclusions:First,from the motivation of the inquiry transfer,the major shareholders in the STAR market choose the inquiry transfer mainly because of the advantages of the inquiry transfer mechanism and the need for the major shareholders to reduce their holdings.The standardization,transparency,and market-based pricing way of the inquiry transfer are the main reasons for attracting major shareholders,and the implementation of inquiry transfer is also expected to create a win-win situation for major shareholders,listed companies,and institutional investors.Major shareholders may also choose the method based on their own reduction needs according to their business models and reduction strategies.Major shareholders’ responsibilities may also influence their choice of inquiry transfer to support the innovative reform of the capital market.Second,in terms of the economic consequences of the inquiry transfer,the inquiry transfer can improve the returns of major shareholders through scientific and effective market-based pricing and help them achieve an efficient exit.At the same time,it can help listed companies introduce excellent institutional investors and adjust the capital structure of the company,and release favorable signals in the inquiry transfer process,bringing positive market reactions.The theoretical contribution of this paper is mainly in two aspects:firstly,the inquiry transfer mechanism is an innovative way to reduce shareholdings proposed by the STAR market,and there is a lack of research on this new method in the existing literature.By analyzing the inquiry transfer,this paper can make up for the lack of research on inquiry transfer and enrich the research on the way of major shareholders’ shareholding reduction.Secondly,the existing studies on major shareholders’ share reduction mainly explore their motivation,economic consequences,and governance through empirical analysis.This paper explores the logical motivation of major shareholders’ choice of share reduction in the science and technology innovation board through a case study approach and extends the logical chain of major shareholders’ share reduction from the perspective of inquiry transfer.This paper also puts forward some suggestions and insights based on the research findings:VC major shareholders can make use of the inquiry transfer to quickly achieve capital recovery.For listed companies,the disclosure mechanism in the inquiry transfer process can be used to convey favorable information on company value to outside investors.Ordinary investors can use the information from institutional investors in the inquiry transfer to adjust their investment strategies.in terms of institutional optimization,policymakers may appropriately reduce the number of subscription invitations from institutional investors to improve the efficiency of inquiry transfer,while simplifying the inquiry process and shortening the lock-up period to futher adjust the inquiry transfer system in a market-oriented direction.