On the premise that stock price changes are sensitive to ownership structure and
financial performance, this study takes A-share manufacturing listed companies in the
first half of 2008 as its sample, and uses 300 sets of data to test and verify the
influence that ownership structure and financial performance could exert on the
fluctuation of stock price. Adopting a cross-section regression method, the regression
equation is established, allowing for the characterization of the correlation between
ownership structure, financial performance and stock price changes.
Three main subjects are studied here. First, this study examines the influence of
ownership structure on the stock price changes of listed companies. Second, it
considers the existence of the sheep flock effect. Third, it looks at the influence of
financial performance on the stock price changes of listed companies.
In this research, the author firstly sets up the evaluation indicator system. Here, the
indicators chosen reflect ownership structures and financial performance, as these
concern investors the most. Secondly, the author processes the data collected, and
applies the Pearson-correlation test to check the data. For those items that are not
correlated in the Pearson test, the Spearman test and Kendall’s Tau-b test are applied
for checking the data. A regression formula will be set and data will be tested for
significance. Finally, the author explains the empirical results obtained.
By so doing, the author seeks to prove that: 1) with the exception of change in
institution equity percentage indicator, the other stock structure indicators are not
correlated to changes in stock prices. 2) China’s stock market has not yet been at
semi-strong form efficiency, and the sheep flock effect does exist. 3) The changes in
stock prices and financial performance indicators are significantly correlated to each
other. Whilst it seems arbitrary to assert the non-existence of functional-fixation, yet a
few opponents do contend that investors are only concerned by accounting income
indicators. Besides net profit growth, the ROE in 2008 model is also proven to be
positively correlated to stock price changes. This suggests that some investors in
China do accept value-based investment.
The conclusions of this paper make a contribution to testing the acceptance of the
value investment idea, plus identifying the ability and efficiency of investors’ ability
in China’s stock market. Furthermore, it demonstrates that it is also helpful for the
government to macro-regulate the capital market.
Key Words: ownership structure; financial performance; stock price changes;