Abstract:
Shareholder governance is the cornerstone of the stock market’s healthy operation. Taking the A-share non-financial companies listed on the Shanghai and Shenzhen Stock Exchange from 2011 to 2021 as the research object, this paper examines the impact of the largest shareholder’s shareholding on stock market manipulation using the high-frequency trading data based on three-second snapshots of stock prices. The study finds that the largest shareholder’s shareholding can exacerbate stock market manipulation, and the conclusion remains robust after mitigating the endogeneity problem. The test for influencing mechanism shows that an increase in the largest shareholder’s shareholding ratio exacerbates the tunneling effect of the largest shareholder, reduces corporate information transparency, and inhibits stock liquidity, thereby promoting stock market manipulation. Further analysis shows that the impact of the largest shareholder’s shareholding is more significant for non-state-owned enterprises and in an environment characterized by weak supervision and balance mechanisms, such as low analyst coverage, combined dual roles, and a low proportion of independent directors. This paper proposes to promote the high-quality development of China’s capital market through measures including building a moderately balanced ownership structure, enhancing the quality of information disclosure, strengthening shareholder supervision, and improving the market manipulation monitoring system.
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