Research On Management Buy-outs Of Public Corporations In China

This paper focuses on some special issues concerning management buy-outs (MBO) in the present situation of China. Such issues include the specific motive, function, pricing, financing and effects of MBO. There are six parts in this paper.Part one is the introduction, which states the background, orientation, approaches, objectives, logical route and possible originalities of the research in this paper.Part two tries to discuss the motive and function of MBO. This paper considers that the reduction and withdrawal of state-owned stock shares provides opportunities and policy directions for MBO on one side, and the management layer has its internal motives of buy-out on another side. The function of MBO is that it can form a kind of management long incentive and selective mechanism.Part three is about the pricing of MBO, which is the key issue in management buy-out activities. This paper argues that the popular Net Asset Per Share pricing method is not proper. The author suggests that Discounted-Cash-Flow method is a more scientific one due to its high relativity to the motives of buy-out.Part four talks over the financing modes of MBO, another important issue to be considered. Chinese MBO encounters more obstacles and difficulties in raising funds because of the limitations of the financial system. This paper indicates that strategic investor assistance model and venture investor assistance model may serve as feasible financing modes in Chinese MBO.Part five analyzes the effects of MBO. This paper makes a theoretic analysis of MBO's effects and then concludes that MBO contributes to corporate performance improvement, which is also proved by the empirical studies of MBO in foreign countries. This paper also expects the possible effects of MBO in China based on the theoretic analysis.Part six is the conclusion of the paper. This part also puts forward some issues needed to study further.