Delisting Of Listed Companies: Theoretical Analysis And System Construction

The delisting of listed companies means that listed companies suspend orterminate the stock transaction in a particular securities market for various reasons. InChina, there are many listing companies that cannot delist from securities market dueto the existing listed companies delisting system, which has weaken the function ofsecurities markets. This dissertation will discuss the listed companies delisting systemat home and abroad, and raise the recommendations and suggestions for Chineselegislation in the end. This dissertation generally includes six parte:Chapter I is theoretical basis of the dissertation, and focuses on the value andsignificance of delisting system of listed companies to the securities market. Firstly,this chapter analyzes the meaning of the delisting system and related concepts.Secondly, the chapter deems that delisting includes involuntary delisting andvoluntary delisting, which is divided into withdrawal of listing and going private.Thirdly, this chapter discusses the need for the establishment of the delisting systemof listed companies, respectively from contract theory, life cycle theory, the securitiesmarket risk; at the same time, this chapter analyses the influence of delisting systemof listed companies to the securities market and deems that a sound delisting systemof listed companies will promote the securities market effective allocation ofresources, improve securities market efficiency, reduce the systemic risk andnon-systematic risk of the securities market, protect the interests of investors.Chapter II focuses on involuntary delisting system of listed companies. Aftercomparing the delisting procedures and delisting standards in China with foreignmature capital markets, the author deems that delisting systems of foreign countries have the following characteristics:(i) delisting standards are specific, clear anddiverse;(ii) delisting program is easy to operate and impartial;(iii) securitiesexchanges have greater powers and greater flexibility of implementation of thedelisting procedures. At the same time, the author deems that delisting system inChina has the following defects:(i) delisting standards are uncertainty, difficult tooperate, easy to circumvent, and lack of quantitative criteria which can reflect changesin the market;(ii) delisting procedures are uncertainty, full of excessive administrativeintervention, lack of relief program for the listed companies which are involuntarydelisted. For the above reasons, the system of involuntary delisting is inefficient.Furthermore, the chapter demonstrates the shortcomings of one criterion of threeyears of consecutive losses from the perspective of accounting rules and deems thatthis criterion artificially extends the delisting procedures and impacts the efficiency ofthe delisting system.Chapter III mainly forces on voluntary delisting system. Generally speaking,voluntary delisting of the listed companies is mostly based on the consideration ofcosts and benefits. When listed companies can obtain more revenue from delisting,they may choose to delist from the securities market through withdrawal of listing andgoing private. The chapter also discusses the methods of voluntary delisting andthinks that the methods of withdrawal of listing are simple, which will happen as longas the shareholders agree to do that, and the methods of going private are complicated,which includes acquisitions, mergers, share consolidations, asset sales. Moreover, thechapter analyzes the U.S. voluntary delisting legislation and believes that the mainpurpose of the voluntary delisting of the U.S. securities market legislation is to protectthe interests of investors because the interests of minority shareholders are vulnerableto damage in the process of listed companies to delist from the securities market. Atlast, the chapter makes research on China' voluntary delisting and thinks that there area few cases about voluntary delisting through going private. And in the a few cases,the reason of delisting is not the market but internal restructuring of state-ownedenterprises. At the same time, the author thinks that there are other defects in China'sgoing private system, such as, information disclosure is insufficient, minorityshareholders have no power to decide or deny delisting companies' going private, it isdifficult to guarantee the independence of the board of the target companies.Chapter IV focuses on the external environment for China's delisting system oflisted companies. We should establish a series of external systems of delisting system of listed companies because that delisting system of listed companies is a systematicproject. The chapter deems that the reasons for low efficiency of China's delistingsystem are excessive intervention of administrative powers in the delisting systemwhich is restricted by administrative power, scarcity of shell resource of listedcompanies and high cost of delisting caused by China's securities issuance system,deficiency of stock circulation platform after delisting because of lack of multi-levelcapital market system, and deficiency of efficient mergers and acquisitions marketwhich causes the poor performance of listed companies that do not want to delist fromsecurities market and have not been taken over can stay in the market.Chapter V mainly forces on the protection of the interests of minorityshareholders in the process of involuntary delisting and voluntary delisting. Aboutinvoluntary delisting, the chapter puts forward establishment of the responsibility ofthe listed companies, executives, and stock exchanges in the delisting, establishmentof relief program for minority shareholders whose interests have been damaged,establishment of an information disclosure mechanism to ensure the listed companiescontinuous and adequate information disclosure, in order to reduce the impact ofinformation asymmetric for minority shareholders and ensure them make rationalinvestment decisions. Then, the chapter analyses voluntary delisting from perspectiveof going private. After studying the American experience, the chapter puts forwardsome recommendations on protection of minority shareholders' interests, such as,giving minority shareholders the right of approval for voluntary delisting,establishment of the controlling shareholder fiduciary duty, improving the informationdisclosure mechanism, setting up a special committee, perfecting stock assessmentmechanism.Chapter VI puts forward some sound recommendations on improving thedelisting system of listed companies in China. The author thinks that we shouldimprove the delisting system of listed companies in China from three aspects:improving the involuntary delisting system, improvingvoluntary delisting system, and improving the external environment for China'sdelisting system of listed companies. The proposals for improving the involuntarydelisting system include that coordination of responsibilities and authority ofsecurities regulatory authorities and stock exchanges in delisting process, refining theinvoluntary delisting standards and delisting procedures to enhance legal certainty andoperational, and establishing a scientific and pluralistic delisting criteria to prevent listed companies from avoiding delisting. About voluntary delisting, the author deemsthat we must gradually improve the situation of no legislation for voluntary delistingof listed companies in China and establish uniform rules. We should establishlegislation to regulate the voluntary delisting of listed companies by means ofimproving the self-regulatory rules, regulations, as well as the "Securities Act","Company Law", which are mutual cooperation, coordination. At last, the author putsforward some suggestions on improving the external environment for China'sdelisting system of listed companies, such as, reducing intervention of theadministrative power to the delisting of listed companies, establishment ofmarket-oriented securities issuance mechanism and reducing the administrativecontrol, development of multi-level capital market system and establishment ofefficient channels of delisting, and perfection of mergers and acquisitions market inorder to allow more mismanaged companies to delist from securities market throughmergers and acquisitions market.