Enterprise Groups In China Impact On The Performance Of Listed Subsidiaries

According to State-owned Assets Supervision and Administration Commission of State Council(SASAC), enterprises group to go public will become the highlighted trend in 2006. This paper starts from the problem in real economic life that whether the group in China should go public as a whole, considering the transitional economy background that Chinese enterprises groups stuck in. And the author hope to exploit some theoretic framework or ideas, helping the reasonable decision process by regulatory watchdogs.Our paper finds that the groups as the controlling ownerships of listed companies are the result of economy institution reform and also the tools by government to facilitate the "catch-up strategy" , which have sped up the economic development and furthered the institutional changes. Most important of all, the enterprises group improved the economic efficiency by resolve the problems caused by market default. Additionally, as the middle one in "Three-Tier Supervision System of Stated-owned Assets" , the groups acted up as the owners, filling the void of owners.Based on the theoretic analysis and empirical study, we come to the following tentative conclusions, hoping it useful to inspire the further researches:(l)This paper supported the assumption that groups in China haveinfluences on the performances and firm values of the listed companiesthat affiliated to groups.(2)Difference natures in ultimate controlling shareholders will cause thedifferent influences on their affiliated listed companies;(3)As for the state-owned groups evolved along the different reform paths,the market valued "Spinned-off Model" lowest, "Three-Tier System"next, and the listed companies with a real functional group rankedhighest.On the above evidences, the paper answered the questions from SASAC. Firstly, we shall divide all enterprises groups into several categories according to their evolvement paths. Then, as for the "Spinned-off Type" group, we suggest the merge between the parent companies and listed companies, which will increase their market values. Whereas the positive influences from the group born out of " Group Restructure Type" , to maintain the structure of group-listed companies seems reasonable, anyway.Another new question comes out after we identify which type group need go public as a whole, that how to recognize and measure the transactions if we restructured the spinnedned-off group by merging the group and affiliated listed companies as a whole? As far as the economic effect is concerned, the accounting issue related to group' s going pubic has profound influences, especially when it comes to aboard listing. Thus, the accounting standard on business combination, which fit for the special situations in China but also converging to the internationally recognized standard, is the event put on the top of agenda.Therefore, in the second part, we defined the specialtransaction-re-emerging to go public" , which refers to the method thatmerge the parent-son companies come from former spinnedned-off restructure in state-owned enterprises reform. And we discuss the measurement attribute of the "re-emerging to go public" before bringing forward the concept "modified pooling of interests" . In order to make the analysis more detailed, we use the case study of TCL Group, to illustrate the reasoning process.As for the creative points in this paper, we conclude them as follows:(l)This paper discusses the characteristics and influences of China' s enterprises group in the background of transitional economy, based on the path along which the group evolved. We develop this paper by resort to the institutional economics, theory of property right and agency theory, at the same time, clinging to the unique in institutional environment in China, which provides the analysis framework for the research onenterprises group, and for the question from SASAC.(2)The researches involved the same topic with us are almost based in theforeign institutional environment, and few dip into the group' sinfluence in China' s transitional economic background. This paperfirstly related the nature of ultimate controlling shareholders tobusiness group and performances of listed companies, providing theresearchers a new standpoint to consider the factors that impact thelisted companies.(3)This paper brings forward the "re-emerging to go public" solutionto the problems left by SOEs reform, and then the modified pooling ofinterests method is discussed. These discussions provides the ideaflashes on the combination business by members of spinned-off group,constructing the integrated theory system by providing solution to theproblems we pick up at the beginning.(4)There exists no consensus on the conception or definition of businessgroup in China. The definition this paper gives out considers the standardhighly recongnized by international community, and also clings to theunique institutional environment in China.(5)As for the data, we use the information about the shareholders mostrecently required to disclose in 2004, which unfolds the explicit relationamong the ultimate shareholders and direct controlling shareholders.