MBOs In Transition Economics: Empirical And Theoretical Study

Management Buyout is defined to describe the situation that managers purchase a majority of stocks or assets of the enterprise they serve for and thus acquire the rights of control. Compared with MBOs in developed countries, MBOs in transition economics present many differences resulted from peculiar political system and economic conditions. Transitional MBOs are originated from transformation in early 1990s and emphasize the privatization need for state-owned enterprises. People expect MBO pattern to innovate energetic corporate governance, stimulate entrepreneurship, keep state capital from devaluation, install workers and so on. Though transitional MBOs are confirmed for its positive purposes, they have negative effects like plundering state fortune and deteriorating insider control problem when few useful supervisory measures are adopted. Based on the theory of firm, only those who simultaneously possess entrepreneurship and enough purchasing power can conduct successive MBO, so MBO pattern should not be used widely in transition countries where both factors are scarce.Aimed at recent MBOs in China, it's urgent to establish a series of related laws and reconstruct financing system. The practices to divide large enterprises into several sectors to conduct MBO are additionally suggested. In a word, Chinese government should attach enough importance to MBO issues and push it in a more healthy way.