China's Stock Market Exit Mechanism

"Narcissus Electronics" was delisted on April 23,2001. It is the first stock that was forced to delist in China's stock market, which denotes the real start of the "delisting mechanism" in the stock market. However, what makes us disappointed is that, compared with the mature foreign markets, the "delisting mechanism" in our market still has not played its full roles. A number of problem companies still remain in the market, "Never out of the stock market" becomes a serious phenomenon. The dysfunction of "delisting mechanism" in Chinese stock market has greatly influenced the optimal allocation of the market's resources.So, it is significant to resolve the problem of the dysfunction of "delisting mechanism" in China's stock market.The author has made detailed analysis of the cause that leads to the dysfunction of delisting mechanism. First of all, it starts from the contract economics, with the use of game model and empirical study, it analyzes the direct cause of the dysfunction of delisting mechanism. The result shows that, the direct cause is the high cost of delisting in the stock market. Under the existing market environment, when facing with delisting decision, no matter the listing company, executives, investors or regulators will burden great loss and high costs. When the cost goes far beyond the benefit of delisting, they will inevitably adopt any measure to rescue the delisting, which results in the dysfunction of the delisting mechanism.Secondly, in order to find out the cause related to the delisting mechanism itself, this paper has made a horizontal comparison of the delisting mechanism in the markets both home and abroad(especially the difference between China and USA) . The result shows that, although the mechanism in Chinese market has absorbed many precious experience of the foreign markets in aspects of the delisting standards and procedures. The mechanism in our market still has many gaps with theirs on the detailed requirements and elastics due to the special background and system environment of the Chinese stock market. It is these gaps that breed the dysfunction of delisting mechanism in China's stock market.Finally, based on the stock market function theory, the author analyzes the profound causes of the dysfunction. It goes that the fundamental cause of the dysfunction of delisting in Chinese stock market is the aberrance of function positioning. As to the stock market function theory, the functions of the stock market should be developed equally and harmoniously. However, since the impact of the initiative motivation of "rescue thestate-owned enterprises", China stock market has not paid much attention to the stock market function harmonious development theory. The funding as the most important function has been expanded abnormally during a long period of time, while other functions are ignored. It is because the unharmonious development of the stock market functions, that is, the positioning aberrance of the stock market functions, leads to the delay of the delisting action in Chinese stock market. Although the delisting mechanism has been released, the positioning aberrance of the stock market makes the dysfunction. In order to solve the problem of the nature the economy institution (socialism oriented or capitalism oriented), the government chose the stock allocation system as that the state owned stock and legal-person stock are frozen and the public owned stock is in circulation at the beginning of the arrangement of the initiative system in China stock market. The stock allocation system is the inevitable choice due to the function positioning aberrance of the China stock market. It raises the stock price greatly and leads to the high delisting cost of the contractor in the stock market, which makes the dysfunction of the delisting mechanism. Meanwhile, the author also finds out the incompleteness of the structure of the stock market and the law system also leads to the dysfunction of the delisting mechanism. Therefore, after raise the fundamental cause the author also analyzes the other causes of the dysfunction of the delisting mechanism in China stock market.Based on the analysis of the causes of the dysfunction of the delisting mechanism, the author puts forward the solution of the dysfunction. He argues that in order to solve the problem of the dysfunction we must stick to two principles: systematization and gradualism. The systematization principle concerns that to solve the problem of the dysfunction of the delisting mechanism in China stock market we should think from a systematic angle and take actions according to the relationship of the factors that impact the delisting mechanism. The gradualism principle concerns that to solve the problem of the dysfunction of the delisting mechanism in China stock market we should be based on the reality of China stock market, take the gradual methods and solve the problems step by step. In addition, the solution should be conducted in three levels: the system level, the infrastructure level and the operation level. The system level refers to the solution of the stock allocation, which is also the fundamental method solving the problem of the dysfunction of the delisting mechanism. The infrastructure level refers to the specific methods that reduce the delisting cost of the contractors. The operation level refers to the improvement of the delisting standards and the delisting procedures by absorbing the foreign experience.The dysfunction of delisting mechanism fully indicates the incomplete development of...