| To improve the efficiency of the state-owned enterprises(SOEs) is one of the most important aims of Chinese economic system reform. A series of restructuring methods were introduced by the government to improve the efficiency of the SOEs during the past years, and management buyout(MBO) was once regarded as one of the most efficient restructuring methods. However, a number of strict provisions were made to limit MBO by the government at the end of 2003, which prohibited the management borrowing from the state-owned enterprises to finance MBO, and prevented the state-owned properties being used as security to finance MBO. It seems that the government dose not support MBO in fact in China presently.A large number of MBOs were adopted to restructure firms in the foreign countries. Especially, the number of MBOs ascended to a historic peak in America at the end of 1980s, which attracted much attention from many researchers. The dominating viewpoint holds that MBO could improve the efficiency of the firms, mainly by reforming the corporate governance system and capital structure. The incumbent management would hold the share of the firm through MBO, which makes the management pursue the same aim as the shareholders, hence solve the agency problem existing in common firms. After MBO, the high debt burden can improve the competition of the firm by tax shield and by reducing agency cost of free cash flow. However, MBO may have negative impacts on the efficiency of the enterprises in the following aspects: (1) the ethical risk of the management is the basis to play down the efficiency of MBO, (2) after MBO the wealth of the creditors might be captured by the management, (3) the management could make profit by making use of the asymmetry of the information or even by manipulating the information, (4) and finally, the price of MBO is still unfair in China.It is important to recognize the positive and negative impacts of MBO on the enterprises restructuring mechanism properly because it is very essential to put MBO into the practice of SOEs reforms in China. On the basis of the previous research results and the practical condition of China, this dissertation comprehensively analyzes the efficiency of MBO. At the same time the variables such as the privilege, the debt holding proportion, the capital cost, the bankruptcy cost and the bankruptcy probability are adopted to construct the model of MBO. The relationship among these variables, the bidding price of the management, and the corresponding impacts are also completely analyzed. The main contribution of the dissertation includes: (1)The Vickery Model is extended and two important variables, namely the proportion of the debt hold by the management to the total debt of the firm and the privilege of the management formed in the traditional plan economy, were introduced to construct the MBO model based on debt and privilege. It is proved that to protect the interest and privilege of their own, the management would bid higher than their value to resist the takeover by the outside investors. In this way the outside investors might hesitate to take part in the auction, which may incur negative impacts on the efficiency of corporate restructuring. (2) The capital cost and bankruptcy cost, and a probabilistic model were introduced to construct the MBO model based on financing source, which is a profitable extension of the Vickery Model. The extended model demonstrated that it is difficult for the firm to be allocated to the investor with greatest value if the financing cost of the management is comparatively low. (3) The values of four factors which may cause the inefficient takeover market were calculated by using the corresponding model of MBO. This dissertation also studies the dramatic movement of the MBO in America, on which enough debates have been focusing. It is shown that the main reason of the collapse of the MBO in America should be the low capital cost brought by junk bonds, the low bankruptcy probability generated by the bankruptcy protection policy, and t...
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