Research On The Discount Effect Of Block Trade In Chinese A-share Markets

In recent years,my country’s A-share block trading market has developed rapidly and has gradually become an integral part of my country’s capital market.The research on the block trading mechanism and its market pricing law has important theoretical value and practical significance for improving my country’s capital market system and improving the efficiency of financial services to the real economy.Through the block trading market data,it is found that there is a significant discount phenomenon in my country’s A-share block trading market.According to wind financial information statistics,as of December 2021,nearly 80% of large transactions are discounted transactions.Especially on May 27,2017,after the China Securities Regulatory Commission issued the "Several Regulations on Share Reduction by Shareholders,Directors,Supervisors and Senior Management of Listed Companies"(referred to as the New Regulations for Reduction of Shareholdings),the discount rate further increased,and the average discount rate in 2019 reached 8.25 %.On the basis of sorting out the existing research,this paper first qualitatively analyzes the development history and current situation of block transactions in my country,and finds that the development of block transactions is closely related to regulatory policies.Then,this paper proposes six hypotheses to explain the discount phenomenon of my country’s A-share block trades in theory,and empirically selects block trade data from January 1,2013 to June 30,2021 to conduct multiple regression analysis to test my country’s large block trades.The influencing factors of the transaction discount rate,and finally the conclusions and policy recommendations of this paper are obtained.The empirical research of this paper finds that the discount phenomenon of block trading in China’s stock market is affected by the liquidity of the stock or the market,the value of the control rights of the traded shares,the risk of the stock,the recent cumulative rise and fall of the stock or the market,the market value of the stock,and the trading of institutional investors.The significant influence of factors such as behavior and the nature of equity of listed companies supports a series of hypotheses proposed in this paper to explain the discount phenomenon of block transactions: the hypothesis of liquidity discount,the hypothesis of control premium,the hypothesis of risk premium,the hypothesis of market selection,and the hypothesis of cash motive.Specifically,the greater the illiquidity of individual stocks and the illiquidity of the market,the higher the discount degree of block trades;the higher the overall volatility or idiosyncratic volatility of stocks,the greater the risk,and the higher the discount degree of block trades;When the recent cumulative rate of return of the stock or market is high,the discount degree of block trades is higher;the larger the discount rate is for companies with smaller market capitalization,non-state-controlled companies,and block trades bought by institutional investors and not sold by institutions.At the same time,the new regulations on reduction of holdings have a significant impact on the discount of bulk transactions.After the new regulations on reducing holdings in 2017,the discount degree of block trades in China’s stock market has increased significantly.Further research finds that the new regulations for reduction of holdings have a significant impact on the relationship between liquidity discount,control premium,risk premium,market opportunity,cash-out motivation and block transaction discount.The impact of the new regulations on reduction of holdings has strengthened the role of these theoretical mechanisms.Based on the perspective and empirical analysis of the new regulations for shareholding reduction,this paper proposes new block trade discount theories such as the risk premium hypothesis and the market opportunity hypothesis,which supplement and enrich the academic research on block trades in China’s stock market,and have certain innovative significance and policy implications.