Study On The Financial Strategy Of Holistic Listing And Spin-off Listing

Corporate financial strategy establishes an overall, long-term and integrated guiding principles for a company to organize financial activities and disclose financial relationships. It guides a company's financial management. In the context of capital market, an alternative choice between holistic listing and spin-off listing is an important financial strategy that determines a company's development, structural adjustment and corporate restructuring. On December 2006, notice of the General Office of the State Council on forwarding SASAC about promoting the adjustment of state-owned capital and the reorganization of state-owned enterprises put forward that listed company via holistic listing has become hot topic in the context of China capital market since the government encouraged state-owned holding companies to do so; since October 2009, listed company via spin-off listing has become another hot topic dramatically and developed into a trend with the success of GEB and multi-level development of capital market. As two different phenomena in china's capital market, holistic listing and spin-off listing are logically different. What we should figure out is why they can coexist. What types, patterns and features do they have? How to improve corporate financial strategic target? What's the relationship between holistic listing and spin-off listing? What are the main influential factors? How to make corresponding choices according to these variables? From the perspective of state finance, how to make fully use of state financial mechanism and state regulation to facilitate holistic listing and spin-off listing, so as to improve the development and strategic restricting of state-owned economy? These issues are practical ones in current capital market. Unfortunately, there isn't enough and systematical research on these two phenomena which are both contradictive and closely related to each other.Meanwhile, in a dynamic, risky and uncertain world, any changes on time, space and activity may lead to fluctuation of returns and risks. Periodicity and fluctuation exist objectively in terms of macro economy, medium economy and micro economy. The same discipline applies on capital market which is the financial environment of the whole economy system. Thus, financial strategy for listed company is not an isolated and closed system. In order to achieve its financial strategic goal, it's necessary for a company to apply some adaptive even reverse financial strategy dynamically, when being exposed to a periodic and fluctuated environment. An enterprise may have a product portfolio or be unrelated diversified. In the context of periodic and fluctuated financial environment, different investment portfolio on products and industries determines different risky premium and the existence of periodicity and fluctuation also permits riskless arbitrage. Actually, a choice between holistic listing and spin-off listing is a financial strategy that implements a dynamic adjustment on the boundary of portfolio. In this way, a listed company can achieve its strategic target focusing on growth, stability or shrinking, as a whole or partially.In view of the above, this paper attempts to synthetically apply theories and methods from the perspective of economics, management science and finance, to do some research on holistic listing and spin-off listing, as well as on corresponding choice mechanism and portfolio model. Further application research is made on strategic choice between holistic listing and spin-off listing implemented by stated-owned listed companies in order to strength macro-control, to enlarge and restructure restate-owned capital.The paper consists of six parts as is listed below:Part 1:Preface.Firstly, this part gives some brief introduction on the background, purpose and significance of holistic listing and spin-off listing. Secondly, some concepts and research overview regarding with financial strategy, holistic listing and spin-off listing are summarized, evaluated and defined, with the objective to introduce holistic listing, spin-off listing and financial strategy as research objects.Financial strategy is part of corporate strategy, covering the aspects of allocation and coordination of finance resources. Different corporate strategy needs to be taken in different economic environment. Different corporate strategies have different characteristics and requirement and need support by financial strategy, thus forming a'corresponding environment -corporate strategy-financial strategy' organic system. Holistic listing pertains to unlisted assets or securitization, hence generates corresponding fundraising and business expansion, asset pricing and transaction, capital structure adjustment, corporate governance structure and so on. Spin-off listing involves IPO and raise equity capital at the expense of releasing some capital, leading to raising fund investment problem, corresponding IPO pricing, equity structure adjustment, control transfer and industrial investment structure change. Both holistic listing and spin-off listing cover all the aspects of financial activities and financial relationships.Part 2:Theoretical basis for holistic listing and spin-off listing.. This part is the theoretical basis of this paper, including economic theories, management theories and financial theories on holistic listing and spin-off listing, and lays a solid theoretical basis on design and application of the corresponding choice mechanism. The logic route is:theoretical basis—economics theory—management theory—financial theory—platform built (three levels of theory).The relevant economic theory mainly includes economic cycle theory, industrial economy theory, industrial lifecycle theory, enterprise life cycle theory, the principal-agent theory, transaction cost theory, scale benefit theory,etc. Management theory category mainly includes:efficiency theory, enterprise core competitiveness theory, management incentive theory etc. Financial theory category mainly includes national financial theory, (external) capital market theory, internal capital market theory, financial strategy theory etc. four aspects.Part 3:Financial strategy regarding holistic listingFirstly, motivation and constraints of strategic choices are analyzed based on the type and model of financial strategy of holistic listing. Secondly, effects on holistic listing and on capital market are discussed. Finally through case study the financial effect are verified through CAR analysis and case study of the holistic listing of Dongfang Electric.There are three types of holistic listing which are holistic listing for the first time after company is restricted as a whole, holistic listing for the first time after parent -subsidiary merger and by means of holding shares to the whole listed. The first two types are quite similar to normal IPO and this paper mainly studies by means of the third type, which depends on the motive and public access conditions. Financial strategy implementation will have both positive and negative effect on the company and capital market.Part 4:Financial strategy regarding spin-off listingThe logic way of thinking is the same as that of the third part. Spin-off listing has broad and narrow definition. Broad definition is that the group of listed companies or unlisted companies separates some of the business or a subsidiary independent on their parent listed company. Narrow definition refers to the listed company strips an subsidiary or some business into an independent part. This paper discusses the last one. There are three types of spin-off listing, which are horizontal listing, vertical listing and mixed listing.Part 5:Discretion in choosing financial strategy of holistic listing and spin-off listingThis part discusses the discretionary principle of holistic listing and spin-off listing through studying macro environment, medium environment and micro environment of corporate financial strategy, which analyzes the corresponding periodic and volatility economic characteristics combined with the capital market, while establishing the relevant financial strategy model on holistic listing and spin-off listing.Discretion of financial strategy is a decision-making behavior in the context of macro, medium and micro environment. Macroeconomic cycle, industry life cycle, enterprise life cycle and capital market constitute a complete macroeconomic environment, meso economic environment and micro economic environment on the discretion of financial strategy of holistic listing and spin-off listing. In the context of interconnected and complex financial environment, financial entities should build appropriate financial strategy system and regulate financial behavior and direction. Firstly corporate financial strategy should identify internal and external environment factors and all sorts of financial status, then objectively select appropriate financial strategy to ensure financial goals. As implementation method of financial strategy, holistic listing and spin-off listing must abide by discretionary principle on financing strategy, investment strategy, dividend distribution strategy and corporate governance involved.Part 6:State-owned company discretion of financial strategy of holistic listing and spin-off listing In the macroscopic view of the national finance and development finance, this chapter analyzes holistic listing and spin-off listing of the state-owned listed companies on how to develop economy, adjust economy structure and promote healthy development of capital market. The discretionary strategies on holistic listing and spin-off listing are discussed respectively.Financial strategy choices of the state-owned listed companies are special for its unique strategic target and its unique characteristics. In the context of macroeconomic development and restructuring—the state-owned economy and state-owned enterprise development and structure adjustment—national financial mechanism,state-owned listed companies should not only realize and increase the value of capital, but also dedicate to economy.development and the adjustment of economic structure and to promote capital market to develop healthily, meanwhile It conveys the macro policies and orientation to national economy. The state-owned company discretion of financial strategy of holistic listing and spin-off listed is a trade-off among multiple and multi-level goals, which is the differences between the sixth part and the fifth part.The main innovation of this dissertation includes five aspects as follows:Firstly, the paper systematically studies holistic listing and spin-off listing. It also summaries and analyzes these two reverse behaviors covering their types, models, paths and possible financial consequences and corresponding financial strategy.Secondly, the paper reveals the discretionary principle on holistic listing and spin-off listing. It analyzes the logic relationship, and concludes that the two reverse behaviors are appropriate financial strategy adopted by financial bodies, regulating financial behaviors and direction according to variation between inter factors and external variables under complex financial environment.Thirdly, the author creates the combination model of discretion. From the perspective of macroeconomic cycle, industry life cycle, enterprise life cycle and capital market fluctuations, the author conducts some research on their dynamic combination mechanism respectively.Fourthly, it expands the national financial theory and national financial mechanism and regulation theory. From the perspective of national finance, This paper points out the logic relationship among financial activities, financial relationship, financial mechanism and regulation principle, and capital market development.Finally, this paper discusses financial strategy implementation of holistic listing and spin-off listing in details. By applying discretion principle and model, it studies the feasibility for state-owned listed companies on how to dived two financial strategies to financial activities and financial relations in the context of micro-level, meso-level and macro-level functions and mechanisms for state-owned listed companies.