The Financial Performace Of Corporage Divestiture: Theoretical And Empirical Research

The corporate restructuring has always been the hot issue in the theory and practice of domestic and international capital markets. Divestiture gradually became an important method of corporate restructuring since the 1980s, and has gradually been widely used in Chinese listed companies. The consequences of divestiture include economic consequences, strategic consequences, and the impact of organization and management. Moreover, the economic consequences can be divided into three dimensions, which are the effect on macroeconomy, the effect on industrial organizations and the effect on enterprises. The effect of divestiture on enterprises, that is, the performance of divestiture, can be measured in two ways. One is the impact of divestiture on the company's stock price, which can be called the shareholder wealth effect or market performance of divestiture, and the other is the impact of divestiture on the performance of company, that is, the financial performance of divesitute.The paper took the financial performance of divesitute as research object, and analysed the mechanism of the impact of divestiture on the performance of corporation based on relevant theories.The paper also used factor analysis to make an empirical research on the effects of the divesture of Chinese listed companies on their performances, and explored the factors which have impact on the financial performance of the divestiture of Chinese listed companies by classification research. The aim is to deepen the understanding of divestiture and provide useful inspiration and guidance for the restructuring activities for enterprises.This article holds that the divestiture can be seen as a kind of operation behaviors that an enterprise sells its integral assets such as its owned or controlled divisions, subsidiaries and production lines or stock which can control other enterprises to the third party, and receive cash, stock or other remuneration, and then lose their control rights. It is a way of asset sales, excluding Spin-offs, equity carve-outs etc. Not all of the assets sales are divestiture, only the sale of integral assets or the stock which can control other companies can be seen as divestiture. The divesting enterprises lose the control rights of these assets when the divestiture is completed.The paper reviewed the divestiture histories of China and America, and sumed comprehensively up the Chinese regulations of listed company divestiture and presented common classification of divestiture. This paper reviewed in detail the research results about the market performance and financial performance of divestiture.This article explained the mechanism of the influence of divestiture on the corporate performance using relative theories.The excessive diversified corporate implements refocusing divestiture can focus resources to strengthen or reconstruct its core business, clarify its main business, and improve core competencies. Divestiture can dispose of the assets leading to negative synergies to eliminate or mitigate the internal negative synergies, and divestitute helps to acquire external synergies. The integrated operation enterprise can construct network with other relevant enterprises by divestiture which is vertical disintegration to make full use of the advantages of the enterprise network. In addition, the divestiture can ease the principal-agent problem and improve the management efficiency of management staff.Based on the analysis of the characteristics and structure of enterprise system, This paper pointed out that the total entropy change of enterprise system includes internal entropy change and external entropy flow, and both have positive and negative entropy which are inseparable. This paper presented that divestiture entropy flow can be seen as the sum of external entropy flow inputed by divvestiute and internal entropy change cuased by the change of such as organizational structure, production process etc. The divestiture can initializes the internal negative entropy change and input external negative entropy flow, as a reslut, the total enterprise entropy is effectively reduced.The paper explained the mechanism of financial performance of divestiture by the action process of entropy.This paper studied the financial performance of the divestiture of Chinese listed companies using the factor analysis method. This paper selected 205 samples from the divestiture events of Chinese listed companies in 2000-2004, and selected 9 financial indexes to constructe comprehensivel index system according to a certain standard, and used factor analysis method to make a analysis of the change of the operation performace former two years and after three years to investigate whether the divestitue improve the performace of listed companies or not.The results showed that the operation performace does not obviously improve in short time after divestitue, but significantly improve after a period of adjustment and integration.This paper discusseed the influencing factors of the financial performance of divestiture of Chinese listed companies by classification research. Based on the empirical analysis of total samples, the paper carrried out classification research according to the characteristics of samples, and the research found that the year of divestiture occurrence and the proportion of tradable shares have significant impact on the financial performance of divesitute. The proportion of state-owned shares, the relative size of transactions, whether related party transactions or not, whether the divested assets related to the main business or not efftect the short-term financial performance of divesitute, but does not efftect the long-term financial performance.The ownership concentration have no significant impact on financial performance of divestiture.This paper analyzed the emergence background of split share structure and the process of split share structure reform and pointed out that after the completation of split share structure reform the divestiture of Chinese listed companies will present some characteristics as followed, strategic divestiture becoming the main theme, the diversification of means of payment, divestiture as anti-takeover increasing, management buyouts increasing and event study method being used more in empirical research of divestiture performance.At last, the paper pointed out that Chinese enterprise should pay attention to divestiture, choose appropriate time to implement divestiture and do well the integration after divestiture.