Study On The Causes And Economic Consequences Of Major Shareholders’ Violation Of Commitments And Reduction Of Holdings

With the implementation of the reform of non-tradable shares,the original shares of company shareholders can enter the circulation market,which makes the Chinese stock market enter a new stage.With the lifting of the restriction on selling shares of listed companies,the company’s stock price keeps rising,which encourages major shareholders to obtain high profits by reducing their shares,leading to frequent reduction of holdings by major shareholders,and even illegal reduction of holdings.Although the CSRC introduced relevant regulations on stock reduction in 2016 and 2020 respectively,the phenomenon of illegal stock reduction still exists.In order to restore the reduction phenomenon to the normal range and maintain the healthy long-term development of the market,we need to further study the illegal reduction phenomenon of major shareholders.Based on the analysis of information asymmetry theory,signal transmission theory,income from control theory and other relevant theories,this paper selects Wuxi Apptec as a case to study the motivation and economic consequences of major shareholders’ illegal share reduction.Firstly,this paper explains the concept and theoretical basis related to non-compliance reduction of major shareholders,and then analyzes the mechanism of non-compliance reduction of major shareholders.Then,it introduced and analyzed the cases and motivations of Wuxi Apptec’s major shareholders’ violation of commitment to reduce their holdings in detail,and analyzed the economic consequences of Wuxi App Tec’s major shareholders’ violation of commitment to reduce their holdings in four aspects,including market reaction,minority shareholders’ rights and interests infringement,corporate governance and operating results.Finally,from the external supervision,legal system,enterprises and small and medium shareholders four aspects,put forward countermeasures and suggestions to deal with major shareholders’ violation of rules and commitments to reduce their holdings.The research shows that the important motivations of Wuxi Apptec’s major shareholders’ violation of commitment reduction include low cost of violation of commitment,the company’s weak supervision of major shareholders,relatively backward government supervision,and maximizing profits by casking out.Due to the information advantage,major shareholders can make a more accurate judgment on the company’s operating performance and development prospects through inside information,so as to avoid losses caused by falling stock prices.At the same time,the high valuation of the company and the instability of the international environment also aggravate the motivation of major shareholders to reduce their holdings illegally.Violations by major shareholders tend to send negative messages to the market,which will react negatively to their actions.In addition,violation of commitment by Wuxi App Tec’s major shareholders to reduce their holdings not only has a certain impact on the company’s governance,but also affects the company’s operating results.In order to reduce the occurrence of non-compliance of major shareholders to reduce their holdings and guarantee the stable and healthy development of the capital market,it is suggested to make efforts in the following aspects: First,the external supervision should strengthen the supervision,increase the punishment,increase the supervision of the media,and increase the transparency of the market.Second,the legal system should regulate the behavior of selling restricted shares after the lifting of the ban,and improve the regulations on the protection of investors’ rights and interests and promote market-oriented reform.Third,listed companies should establish an effective internal control mechanism,improve the internal governance structure of listed companies,strengthen the information disclosure system,encourage small and medium-sized shareholders to actively participate in corporate governance,and establish stable shareholder relations.Fourth,small and medium-sized shareholders should invest rationally,avoid blindly following the trend,improve their professional level,actively exercise their legitimate rights,participate in corporate governance,strengthen shareholder communication,so as to avoid their rights and interests being infringed.