Analysis Of The Delisting Rules And Its Effect On The Listed Company Of China

A stock market can develop healthily only on the conditions that quality companies are encouraged to go public and at the same time, poorly performing listed companies are allowed to retreat from the stock exchange market. Financial distress and incapability of operating durably are the main causes for the company to be delisted from the stock market in the U.S.A. and Japanese stock market. There are two procedures of delisting for the poorly operated company. One is to shape up in grace period, the other is got delisted if failed to turn around within grace period. The regulations of Chinese stock market developed quickly. The first regulation for the poorly operated companies was the Special Treatment Regulation published by China Securities Regulatory Commission (CSRC) in 1998. The ST Regulation was designed to decrease the over-speculated behavior in the second stock market by the mark of ST before the name of poorly operated companies. Despite steps regulators have taken to alert investors of risks, the stock market was still rife with speculation on rumors of restructuring or a turnaround of the ST companies. Research shows that the ST regulation has limited affection on the market. Delisting rules was published to better regulating the stock market in 2001. It was one of the most important regulations of Chinese stock market. The Delisting Rules were designed to promote the integration of Chinese stock market with international tradition in order to keep up with our country's reform and opening up. And it can urge the companies optimizing its governance. The aggressive market effect of the delisting rules was obvious. Firstly, it makes the investors take more care of the companies operating achievements, and value investment become more and more popular. Secondly, it encourages the listed companies to strengthen their corporate responsibility and management. This can make the stock market run healthily.