Corporation Contraction And Its Performance

Corporation contraction is a concept against corporation extension. It is a kind ofmethod in capital operation that can contract the main operating range and the scale ofthe company by restructuring the capital or asset. The methods of corporationcontraction include divestiture, spin-off, equity carve-out, stock repurchase, targetedstock, voluntary liquidations, etc. The methods of corporation contraction appearedsince 1970's in company with the rethinking of mix merging appeared since 1960's.Now all kinds of corporation contraction methods are widely used in corporationrestructuring in west, and people's studying in the effect of using the methods ofcorporation contraction found that their impacts on the corporate financial performancewere positive. In all of the corporation contraction methods, except divestiture that has beenwidely used in our country, others have not been widely used. The paper will primarilystudy the operation performance of the corporation contraction that have been used inour country on the basis of introducing the corporation contraction methods, explainingthe general reason of contraction and analyzing the theory basis of it. To the operationperformance of divestiture, the paper analyzes it with the sample of the listed companysthat operated divestiture in our country in 2001 by the tool of factor analysis. Theanalysis results indicate that in our country the divestiture performance is remarkable,exiting a lot of enterprises use it to obtain lump-sum situation of income, and theapplication of divestiture in our country remains to standardize further. To the otherssuch as spin-off, equity carve-out and stock repurchase, the paper will analyze theirperformance with the cases. The analysis results indicate that the enterprises of ourcountry can use them accurately and effectively, and the application of them can bringthe positive result to the development of enterprises. But this just based on caseresearches, their performance will be researched further and be studied on the wholewhen they will be used widely in the future. At last, the paper puts forward somequestions and suggestions that should be paid attention to in the application ofcorporation contraction in our country, expecting to help the corporation contractionmethods to be applied and develop in health.