Effect of Non-tradable Share Reform on Chinese Stock Market
|Keywords||the reform of split share structure the stock market the basic function the listed company operating performance|
The existence of the split share structure is a unique system defect in our stock market. In the era of the split share structure, the fundamental function of the stock market was hardly operated, listed companies taked little notice of their companies’performance, instead of it, they only purchased high premium financing ignoring the profit of medium and small investors. As a result, medium and small investors eagerly wanted to gain benefit by buying an selling their own stocks and this kind of behavior caused the lost of value investing, the whole stock market was full of Speculation under the lack of credit condition.Starting at the reform of the split share structure in April,2005, its aim at reforming the unreasonable share structure , making state-owned shares and institutional shares become tradable share, eradicating the split share structure which hindered the development of stock market. After the reform of the split share structure, the benefit of tradable shareholders and non-tradable shareholders in the same liste company is becoming consistent, the behavior of plundering of resources of listed companies by non-tradable shareholders will be improved to a certain extent. Governance of listed companies will be more resonable than before, it will focus on the company’s potentialities and values in the stock market other than short-term interest.Confronting the reform of the split share structure,evaluation of the effectiveness is mixed in walks of life. To be honest, during this five years time, the volatility in our country’s stock market is not weakened. shanghai composite index came up to 6124 in 2007 and later on decline to about 1600, decreasing by 70%. This phenomenon has never happened before in stock market history, so, the criticism on the reform has been increasing.In order to make a comprehensive evaluation of the influence on our stock market made by the reform of split share structrue, this article will study from both macro and micro aspects. In terms of macro aspect, I mainly consider if the reform promotes the basic function of the stock market, based on a large number of market data, and through statistical and empirical analysis, I draw a conclusion that the reform improved the basic funcions of the stock market including finance function、resource allocation and barometer function, whereas the fluctuation in market after the reform is caused by many factors. In terms of micro aspect, I mainly consider the change of large shareholders and management’s behavior. After the reform, large shareholders and management focus much more on long-term development of their company, the financing of listed companies, mergers and acquisitions and other actions will aim to improve the company’s growth. By the empirical analysis of 150 listed companies in 2005, the result shows that the reform of split share structure promote campanies’governance structure, improved operating performance of listed companies, aspirations of reasonable financing through the stock market and promote their development increased. Finally, this paper will give advice about improving the stock market system and strengthen the supervision.