The Impact Of Margin Trading And Securities Lending System On Insider Reduction

September 4,2005,China Securities Regulatory Commission issued the "Administrative Measures for the Reform of Non-tradable Share Structure of Listed Companies",which opened the curtain of the reform.Since then,the shareholders of listed companies have obtained the right to buy and sell non-tradable stocks in the secondary market,and the insiders’ motivation to reduce their holdings has become more and more intense.According to statistics,from 2007 to 2021,A total of 83,993 times of insider reduction occurred in China’s A-share market,the number of reduction reached 5372 million shares,and the amount of reduction reached2,8252.8 billion yuan.The news of insider’s reduction of holdings is frequently searched on the Internet,and the economic harm behind it and the purpose of wealth transfer have aroused heated discussion.The behavior of insider selling of the company’s shares is regarded as a negative signal by the market,driving down the stock price,disturbing the order of the capital market,and even damaging the development of the real economy.In order to restrain insiders’ behavior of reducing their holdings,the regulatory authorities issued "the strictest regulations on reducing holdings in history"--"Several Regulations on Reducing Shares held by Shareholders and Directors,executives and supervisors of Listed Companies".Although the new regulation has been effective,the restraint is still limited,because insiders are even quitting to circumvent the regulation.In this context,based on the pilot of margin trading system,a landmark event,this paper explores market-based governance ways to restrict insiders to reduce their holdings.This paper chooses the listed companies of Shanghai and Shenzhen A-share non-financial industry from 2007 to 2021 as the research object to explore the influence of margin financing and short selling system on insiders’ reduction of holdings.By analyzing the interest game process between short sellers and insiders in the capital market,the paper explores the influence path of margin financing and short selling system on insiders’ reduction of holdings.The empirical findings are as follows:(1)Margin trading system is significantly negatively correlated with the probability and degree of insider’s reduction of holdings,that is,margin trading system inhibits insider’s reduction behavior.(2)The lower the risk of stock price collapse,the smaller the unemployment cost and the lower the reputation loss,that is,the lower the cost of selling down,and the greater the inhibiting effect of margin trading system on insiders’ selling down.It shows that margin trading system can affect insiders’ behavior of reducing holdings by increasing the cost of reducing holdings.In order to ensure the validity of the above conclusions,this paper uses parallel trend to verify the feasibility of the differential model,and adopts propensity score matching method to overcome the endogeneity caused by sample bias.At the same time,this paper changes the measurement methods of core explained variables and core explanatory variables,changes the regression model and removes the samples with less than 1000 shares to exclude the influence of trace transactions.Empirical regression results show that the above two conclusions are still valid.In the further analysis,through the subdivision of the positions of insiders,it is found empirically that there is an information hierarchy phenomenon in the inhibitory effect of margin trading system on the insider’s reduction,that is,the inhibitory effect on major shareholders,executives and directors is significantly higher than that of supervisors.At the same time,based on the investigation of insiders’ motivation to reduce their holdings,this paper finds that margin trading system not only inhibits insiders’ self-interested reduction behavior,but also produces certain constraint effect on non-self-interested reduction behavior.To sum up,margin financing and short selling system provides an effective market governance path for restricting insiders’ holdings reduction,helps guide orderly capital market holdings reduction,promotes institutional innovation of the financial system,and provides new empirical evidence for regulators to optimize the design of shareholding reduction system.