A Study Of Divestiture Behavior And Performance Of Listed Companies

Through searching related literature of divestiture, we found that there is a big difference in divestiture motivation of listed companies in China and the Western countries which is mainly based on efficiency of divestiture. Therefore, the theory of divestiture in the West may not be entirely suited to explain China’s divestiture behavior and performance consequences of listed companies. From the end of the20th century to early21st century, there have been some strange phenomena of the listed company divestiture events in China’s stock market, such as "related transactions""the end of year effects" and "the same jurisdiction of trade", and so on. However, due to the main concern of early research was the securities market regulatory policy divestiture of listed companies and the company’s own factors, making the divestiture feature of "connected transactions" and "late effects" are highly concerned about, by contrast,"belong to the jurisdiction of the divestiture transaction" did not pay attention to. We are interested in that and in the process of economic transition in China, what influence about the divestiture behavior of a listed company under the political centralization of fiscal decentralization reform? What motives of local government intervene in divestiture activities of listed companies? And how to evaluate the listed companies divestiture transaction behavior and performance consequences in the context of transition economies in China? Currently, these problems are seldom paid attention to and much less in-depth system analyzed and researched. This article considers that listed companies belong to the jurisdiction of divestiture transactions, is by far the more valuable research and also more reflects China’s decentralization reforms institutional background "divestiture visions". In order to analyze and interpret the vision of divestiture, we must be analyzed local government intervention in the context of the reform of China’s political centralization of fiscal decentralization in the economy.Basing on background transition economy system in China and the perspective of political economy of government intervention, starting from the fiscal decentralization reform brought about by competition between local governments and political incentives for promotion as a logical starting point and the theoretical foundation, this article studies comprehensively the effects of local government intervention on divestiture trading behavior and economic consequences of listed companies in the context of the transitional system decentralization reforms (economic decentralization and political centralization). Through these initial explorations, we attempt to provide a possible explanation for divestiture of Chinese listed companies belong to governed transactions, and a useful reference of divestiture activities of the listed companies, as well as empirical evidence with understanding the economic transition in China under the local government intervention in the motive, means and results, which in turn impelling local governments further change their functions to think deeply.Using divestiture transactions for the listed companies in Shanghai and Shenzhen stock exchanges from2004to2005as our study sample, we empirical test in the context of local government interference, different property will have an impact on the selection of listed company divestiture transaction object type, how to evaluate such divestiture transactions of the same jurisdiction for security marketing, the difference of marketing process(in other words the performance difference of government intervention) will affect the improving performance of divestiture of listed companies. Even further, marketing process interacts with the same jurisdiction of the divestiture transactions and listed companies in property rights will have what effect on the divestiture of performance.There are some findings in this study. First of all, a major factor of the same jurisdiction of the divestiture transactions of listed companies is government interference root in the fiscal decentralization.There are significant differences in divestiture transactions Act between different ownership corporate. Compare with the companies controlled by Central Government and non-Government, the divestiture of listed companies controlled by local government is more likely to the same jurisdiction. As a whole, the reaction from the security marketing to divestiture of listed companies was negative. However, there isn’t a different assessment of the security marketing between the same jurisdiction of the divestiture transaction and the non-jurisdictional transactions. During the announcement period of divestiture transactions, there isn’t significant difference of the cumulative abnormal return of the divestiture transactions between the same jurisdiction and the non-jurisdictional transactions. After the control of the relevant factors, this phenomenon still persists. Compared to non-jurisdictional transactions, market doesn’t give different evaluation to the same jurisdictional transactions. Secondly, in general, less local government intervention and higher marketing process are more conducive to enterprise independent operating, so the performance of divestiture of listed companies is better. Thirdly, regardless of which kind of property of listed company, even in the area of high marketing process and less government intervention, if early asset split of listed company is same jurisdictional transactions, this non-marketing allocation of resources will bring about significantly negative effect on performance improved, that is if asset split transactions is not based on resources optimal allocation, but mixed into Government’s will and motivation, there will be negative effect on the performance of divestiture of listed companies even if good external environment. At last, due to directly of property ties relationship, listed company controlled by local government was more easy intervened by the local Government of administrative in operating process compared with other company. So there is a negative effect on performance improving for the listed company which was controlled by local government even in the area of less government intervention and high marketing process. Compared with government control company, because of no property ties, coupled with government relax control, reduced intervention and many benefits produced by marketing operating, non-government control company make contact with government with less time, human resource and finance costs, get resources more through market way, and put more energy and resources into enterprise operation. So there will be significantly positive promotion in performance of non-government Control Company in the area of high marketing process and less government intervention.