| As China quickens its steps to reform state-run enterprises, it is the general trend that state-owned capital gradually withdraws from common business field. During this course, management buy-outs (MBO hereafter) can be an ideal choice for state-run enterprises in the process of proprietary right transfer for a number of reasons. For example, MBO can play an active role in optimizing company's management structure, upgrading management proficiency, mobilizing the initiatives of management group, lowering surrogate costs and improving company's overall operational condition. MBO can also benefit private enterprises and help them to attract and keep more qualified personnel by tying individual interests with that of the company. Furthermore, it can help private enterprises to turn their family business structure or obscure management structure into standard company structure and thus enables them to develop faster. In sum, the research of MBO is beneficial to both state-run and private enterprises in China. Since the first case of MBO in 2000, China has witnessed an increasing number of enterprises undergone MBO. Through MBO, enterprises can realize the integration of the ownership, management and control, which, in turn, will completely eliminate the irrationality in our distribution system. However, along with the exploration of MBO practices in China, there have been found some problems that call for immediate solutions. In particular, a perfect legal system is urgently needed for the smooth operation, innovation and development of MBO in China, as well as for the avoidance of illegal practices under the guise of MBO operation. Consequently, it is both a meaningful and urgent task to conduct research on this subject. The paper consists of six chapters. The first chapter outlines the purpose of MBO research, the methodology to be applied and the overall structure of this paper.Chapter two introduces the origin, evolution and functions of MBO. The origin of MBO can be traced back to the conventional merger-acquisition theories in the western countries. Since 1980s, the United States have experienced a flourish in MBO operation brought about by its continuous economic growth and high inflation rate. In addition, the favorable taxation policy by government has also encouraged staff members (managers and employees alike) to hold company shares. In countries with a transitional economy such as Russia, MBO has also been widely applied to privatization movement beginning in 1990s and been considered one of the most practicable means for state-own assets exit. Then, the paper introduces the five features of MBO and analyzes its roles in optimizing company management structure, improving motivation mechanism, as well as strengthening control of managing groups.In the third chapter, the author compares MBO practices in the market economy and the transitional economy, focusing on the experiences and lessons that can be borrowed or drawn respectively. The argument is developed from five aspects, including practice model, financing channel, pricing, exit channel, market environment, etc. Through the comparison,it can be concluded that in a market economy, the well-developed financial market, with its perfect proprietary right transaction system and competition mechanism, can spur MBO practices and enable enterprises to develop faster after MBO. However, in countries with a transitional market, MBO practices can be held back by a number of factors, such as imperfect trade system, lack of financing means, limited exit channels, etc. Moreover, even after MBO, due to the lack of competition mechanism and the existence of uncertainty in the market, the management group tends to pursue short-term interest and thus brings MBO away from the designed aim of the government. In the fourth chapter, focus is on an analysis of MBO cases in China. The author first reviews the background of MBO practices in our country and its development so far. Since the early period of our reform and opening-up, the govern...
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