Abstract: Based on the“Provisions on Several Issues Concerning Representative Litigation in Securities Disputes”implemented by the Supreme People's Court on July 31, 2020, this paper studies the market response to the securities representative litigation system. The findings show that the securities representative litigation system will generate positive market reactions. The mechanism test reveals that the implementation of the securities representative litigation system not only significantly increases the number of independent directors resigning and expressing dissenting opinions, but also strengthens the supervision of small and medium-sized shareholders over the company. Therefore, the securities representative litigation system will have a positive market response. The heterogeneity analysis reveals that in companies with lower proportion of independent directors, higher agency costs, and lower shareholding ratio of institutional investors, the positive market response generated by the securities representative litigation system is more significant. Therefore, it is necessary to actively guide investors to use the securities representative litigation system to safeguard their own rights and interests, and the regulatory authorities should further strengthen the support role of the investment service centers for the securities representative litigation system.

Key words: minority shareholder protection, security representative litigation system, corporate governance, market response