The Relationship between Social Responsibility and Majority Shareholders’ Stock Selling: Considering the Mediation of Investors Tendency

Chuan Lin,Huimin Zhu,Huan Chang

doi:10.22158/jbtp.v6n1p12

Abstract

<p><em>Based on the research object of majority shareholders’ stock selling at the post period of equity division reform, this paper takes 8019 A-share listed companies in Shanghai and Shenzhen stock market from 2007-2013 as sample, empirically analysis the relationship between social responsibility and majority shareholders’ stock selling, and consider mediation effect of the investor tendency. The study found that from the point of internal governance effect, the better of social responsibility, the lower possibility of majority shareholders’ stock selling. At the same time, the lower of market reduction premium, the lower possibility of majority shareholders’ stock selling, after considering the influence of investors’ tendency, the inhibition effect of social responsibility will be magnified, which means securities market identity with the inhibition effect that comes from the social responsibility caused by listed companies’ internal. Further study found that majority shareholders will avoid stock selling during the period of the social responsibility reporting, and market investors will hold different attitudes toward majority shareholders for their first and continuous stock selling, and on their view, continuous stock selling is a “bad” event.</em></p>

Highlights

In 2005, China Securities Regulatory Commission implemented the reform of equity division
“malicious reduction” of shares by majority shareholders will produce a negative impact on the securities market, it is easy for the market investors mistakenly think that there existed problems within the company, damaging the interests of the company; on the other hand, the majority shareholders may encroach on the small and medium-sized shareholders’ interests in the process of maliciously reducing the number of shares
When the majority shareholders continue to reduce their holdings, the market investors will reduce the trust of the company, which will offset the positive impact of social responsibility, and in this case, the rational management will find the company’s market value difference, they can only continue to strengthen the implementation of fulfilling social responsibility to reduce the adverse effects of continuous reduction of majority shareholders

Summary

Introduction

In 2005, China Securities Regulatory Commission implemented the reform of equity division. On the one hand, when the majority shareholders find the market investors sought after the company’s stock because the company fulfilled the social responsibility, the majority shareholders need to cooperate with the company to support the company’s development, especially the majority shareholders who do not reduce all the shares, they will not destroy the good image of themselves and the company in the eyes of investors through continuous reduction. When the majority shareholders continue to reduce their holdings, the market investors will reduce the trust of the company, which will offset the positive impact of social responsibility, and in this case, the rational management will find the company’s market value difference, they can only continue to strengthen the implementation of fulfilling social responsibility to reduce the adverse effects of continuous reduction of majority shareholders. After considering the influence of investors’ tendencies, the impact of social responsibility on continuously reducing shareholdings by majority shareholders will be significantly enlarged

Specification of Variables

H10 7 Index 8WFBS

Findings

Further Analysis