The Timing and Market Reaction for Large Non-tradable Shareholders' Holding Reduction

• Main Authors: Lin, Heng-Hsin, 林恆鑫
• Other Authors: Yeh, Yin-Hua
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/ag2ym6

碩士 === 輔仁大學 === 金融與國際企業學系金融碩士班 === 100 === The Non-tradable Share Reform, one of the most important reforms in Chinese capital markets, was designed to solve the problem associated with the division of non-tradable and tradable shares. The reform began in 2005 and has successfully allowed many non-tradable shares to be traded in the open market. This paper investigates the following issue of share reform. Specifically, I focus on the timing and the market response associated with the reduction of large non-tradable shareholders using the sample of 639 listed firms of the Shanghai Stock Exchange in the sampling period from 2009 to 2011. I postulate that the timing and the market response are moderated by factors such as the compensation and promises that non-tradable shareholders made to tradable shareholders when they were granted the liquidity of shares. The empirical results support the timing hypothesis that positive cumulative abnormal returns are associated with the large non-tradable shareholders’ initiation of reducing shares. That is, they time their sales of shares at high level of market price. The price rebound after a couple days of their sales of shares. I find no significant evidence that large non-tradable shareholders’ timing is affected by the compensation and promises that they had made to the tradable shareholders. However, the market response is less negatively affected by the promise of delaying sales of shares and the limited selling price with respect to the close price of reverting trading day.