| Based on the collections of Chinese MBO of listed company occurred from1997onwards, this study empirically test and investigate the distinguishing pre-existing characteristics of Chinese listed firms engaging in MBO, the MBO tendency, and the impact of MBO on the performance of the company.On the whole, the development of Chinese MBO of listed companies can be divided into three stages:the initial stage of exploration, the stage of tortuous development and the stage of regulation. Most of the MBOs of listed companies are small and medium-sized enterprises in traditional mature industries, MBO in the high tech industry and service industry of listed companies started to appear.By investigating and identifying the pre-existing characteristics of the companies for the two year and one year preceding the year in which the firm achieved the MBO, we found that the characteristics of the firms have changed. Namely, compared to matched samples, the characteristics of the firms engaged in MBO didn't have significant difference two year before they achieve the MBO, but one year preceding MBO there are significant differences on price earning ratio and current ratio. There exists value underestimation phenomenon one year before the firm achieved MBO, and the firms have better market profitability and higher financial liquidity can be used in the future. The longer the time of core management member be in office before MBO, the higher the probability that the firm will undergo MBO. Firms which the chairman of the board of directors or general manager is the founder of the company have higher probability to perform MBO. The higher the current ratio of the company the higher the probability undergoing MBO.Companys'financial and market performance post MBO is significantly higher than matching samples, at the same time the comparison of management buy-out performance between pre and post MBO found that the performance of listed corporations has been improved after management buy-out.The characteristic analysis based on the perspective of ultimate control of post MBO listed companies in China found that, there are three types of ultimate control transfer of MBO companies:the ultimate control transfered, ultimate control unchanged and scattered ownership.The ultimate controller employed entities and shell holding company to form pyramidal structure to realize their control on the post MBO listed companies, the proportion of entity holding company is higher than that of shell holding company. There exists the divergence between cash flow right ans the ultimate control right in post MBO firms. The ultimate controller usually keeps the listed companies under control through the pyramidl structure. The separation degree between cash flow right and control right of state ultimate controller is higher than management controller or management-controled-company as ultimate controller. Compared to the state controllers, management controllers or management-controlled-company controllers tend to keep the company under their control through longer control chain(namely more control level) As for the number of control chain, the post MBO companies which were controlled by ultimate controller via a single chain are more common. Under multi-control chain circumstance, compared to the management controller or management-controlled-company controller, most of the state controller tends to employ shorter control chain and less number of chains to realize their control on the post MBO companies.In China's transition economic period, to transfer the ultimate control to the incumbent management or management-controlled-company by means of MBO will help to realize the performance of post MBO companies to ascend effectively. There exists a U nonlinear relationship between ultimate control and corporate performance of post MBO. The control of untimate controller of the post MBO companies has two different effects-the intrenchment defensive effect and benefit convergent effect. The divergence degree of ultimate control from cash flow right has a significant negative correlation with the performance, that is, the higher the divergence the worse the performance post MBO, and the cash flow right of ultimate controller is positively correlated with the company's financial performance. The results show that improvement of the cash flow right of the ultimate controller after MBO will help to improve the performance of the company, cash flow right has "convergent effect". Width of the control chain in pyramid structure has significant negative influence on post MBO performance, and the width of control chain has strong adjustment function on the negative relationship between finicial performance and the levels of control chain. Therefore, the pyramid structure negatively affects the post MBO performance. The managerial ownership has a significantly positive linear correlation on the post MBO financial performance.The board scale of directors of the post MBO listed companies has a trend of decline, the management structure, that is, the position of chairman of the board and general manager are taken by different people, the proportion is mor than75%. The post MBO companies has serious insider control phenomenon, most MBO companis has director-to-company interlocks, but this ratio is below the national average. If the position of chairman of the board and general manager are taken by the same person, the performance after buyout will be worse, otherwise the performance improved. The higher the insider control degree, the worse post MBO performance. The companys' post MBO performance will be improved with the ownership of board increased. The increasing frequency of board meeting is of signigicant and positive effect on the companys'post MBO performance. The quantity of director-to-company interlocks has significant positive correlation with post MBO performance, our finding has proved the resources dependence theory under transition circumstance, The size of the board significant nonlinear related with the market performance Tobin's Q. |
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