A Study On The Exit Strategy Of State-owned Enterprises

In recent years, China's state-owned assets continued to maintain and increase their value. The state-owned enterprises achieved the rapid growth, and many large enterprises have been come into the global 500 companies. However, as their roles in the national economy, operational efficiency, income distribution and reform directions are concerned, there are two opposite views. One view holds that the state-owned enterprises are running well and the main task in further reform is going to solve the incentive and supervision problems. Another view argues that the monopoly and policy support makes their inefficient and high income, the reform has to focus on removing their privileges and putting their property rights into practice.In common sense, the SOEs'are not suitable for market competition for their natures. In China, they should better exit from non-public fields when their exclusive particularities, such as profits source, income distribution and relationship with public power, are taken into consideration.There are three main methods for SOEs'exit:sold publicly, insider priority to buy and stock free distribution. Each method is a process of re-allocation on state-owned assets and the fairness should be taken into account. The ownership structure of the enterprise will be changed during the process of reallocation, which also brings variant efficiencies. This dissertation measures the fairness of State-owned assets allocation with variance. Based on the model proposed by Edwards and Weichenrieder(1999) and the view of La Porta, etc.(2002), this paper build a theoretical model and analyzed the impact of ownership structure on the operation efficiency."Sold publicly" means indirectly distribute state-owned assets by fiscal expenditure, which takes the ownership and operation rights of the enterprise into uniform and their efficiency will be the highest among three methods. It cannot achieve perfectly equal, but is still far better than the way of "insider priority to buy" whose fairness level is lowest as well as "Stock free distribution" gets perfect equality.Institutional improvement will bring two positive affects onto the enterprise efficiency:one is to enhance external shareholders'supervision and another is to reduce transaction costs and strengthen equity liquidity by protecting minority shareholders. When the stock market is composed of individual investors and institutional investors after SOEs' exit, the main problem is to prevent the latter violating the former's interests. And when the shares are centralized by market transactions, the problem will be to avoid collusion between internal shareholders and institutional investors. In order to avoid and mitigate above problems, it is crucial to strength the market supervision and improve information transparency.In China, The SOEs' future reform should be focused on exit from non-public domains. This dissertation studies the improved "Stock free distribution" arrangement based on the experience of Czech and puts out policy implications for China's SOEs' exit strategy.