Large shareholders' stock selling and corporate performance: Evidence from China

This paper investigates whether and how large shareholders' stock selling influences corporate performance and conducts an empirical study using the data of Chinese A-share listed companies. The findings reveal that large shareholders' stock selling has a significant negative impact on corporate performance, primarily manifested through two paths that are intensifying agency conflicts and increasing financing constraints. Moreover, the negative effect is more pronounced in enterprises with more intense product market competition, non-state-owned enterprises, enterprises with lower ownership concentration, and those with higher equity balance degree. Further analysis confirms that cash dividends significantly mitigate the negative impact of large shareholders' stock selling on corporate performance, while share pledging significantly exacerbates the negative effect. Our findings suggest that governments should regulate the stock selling of large shareholders based on internal and external enterprise environments, while international investors should consider market information such as stock selling, dividends and pledging when optimizing their investment allocations.