Management Buy-out (MBO) And The Property Right System Reform Of Our Small And Middle-Sized Enterprises

The reform of the Chinese economic system enters a new phase after the entrance of WTO and the problem how to increase the benefits of the state owned enterprises becomes a key point which attracts the attention of the assets management departments. After the reform and opening of our country, although our government has adopted many measurements to improve the development of the state owned enterprises, the reforms of them especially the reform of the small and middle-sized enterprises are in hot water because of the existences of the unsolved problems for a long period such as the unclear property right, deficiency of the encouragement system and low manage efficiency etc in the enterprises. Our government finally takes cognizance of the main problem which obsesses the development of the state owned enterprises is the problem of the property right and system. After the Sixteenth National People's Congress, the new layout of our state owned economy came out, the state owned capitals exited from the competition and the reform of the small and middle-sized state owned enterprises was more rapid. Under this kind of circumstances, more and more small and middle-sized enterprises used the way of the MBO to promote the development of their enterprises. The MBO came out in the 1980s in the western country and this was a way of lessening the operation scales or privatizing the nationalized departments. It really worked in the western economic reformations and was canonized by many economists. In the early days of 1990s, it came to our country and was very popular in the later 1990s especially in the listed companies. There were many deserved instances came out after several years'practices and especially the loss of state assets that aroused abroad dispute. This is a distinct characteristic of our country that is different from the western countries in the MBO that is determined by our Chinese unique backgrounds and economic development status. The main contents of this article are the distinct characteristics of our country that are different from the western countries in the MBO, the effect of it for the property right system reform of our small and middle-sized enterprises and the main problems and solving methods in the MBO process of our country. The article includes mainly the following five parts and also the summarization: The first part is about the historical background, cause and the theoretical basis of the generation of the MBO. The MBO was generated in Britain. It was the result of the partition, shrinkage of enterprises and the cause of it including the following aspects: 1. The cause of the managers in seeking the changes of the positions and striving for benefits, 2. The cause of the companies in getting rid of the restrictions of the listed company systems, 3. The cause of the recovery from the hostile acquisitions, 4. The cause of the big shareholders in transferring large amounts of shares, 5. The cause of the operations lessening and the sailing of the branch-enterprises of disparate groups, 6. The cause of the privatization of the nationalized departments. There is profound theoretical basis both in the aspects of economics andmanagement for the MBO. The second part discusses the MBO development process, direction and characteristics in our country. It is different from the foreign MBO for the MBO of our country, which is generated along with the penetrating of the reform of the economy system. Especially with the entrance of 1990s, the reform of the enterprise property right system became the key point that restricted the increase of the enterprise benefits. After 1995, under the direction of the national "manage large enterprises well while ease control over small ones"policy, the local governments began to quicken the reform of the property right system of the small and middle-sized enterprises. In the adjustment of the process of "the quit of the nation and the entrance of the people", it transferred the stock ownership to the management level by the way of MBO as a kind of encouragement for the ageing contribution for the enterprises. It can be said that the essential of our MBO is a kind of treatment to the state owned property (with the character of the deal of the property right) and a kind of deepening for the share holding of the operators. From the aspect of the development direction, we can see the MBO directions are as follows: 1. It intends to be stricter in the control of MBO for the listed companies and large sized state owned enterprises. 2. It intends to be rapidly growing for the amount of MBO for the unlisted companies and small and middle-sized enterprises. 3. The listed companies in specific industries possibly intend to be the hotspots of MBO.4. MBO intends to be an important way with Chinese characteristics in the encouragement of the management level. The MBO of our country is mainly different from the western countries'in the following ways: 1. The economic backgrounds are different. 2. The objectives and objects are different. 3. The principal part and the goals are different. 4. The pricing and financing models are different. The third part discusses the effect of the MBO in the reforms of our small and middle-sized enterprises. The characteristics of the large sized state owned enterprises bring in many problems in the implementation of the MBO. In China, the MBO is more proper for the small and middle-sized enterprises comparatively, and it plays a very important role in the system reform of them: 1. MBO can promote the adjustment of the enterprise structure and the rebuilding of the operation flow of the enterprise effectively. 2. MBO is good for decreasing the agent costs of the enterprise. 3. MBO is good for cultivating an entrepreneur group with specialization high diathesis. 4. MBO initiates a new idea for the modern human resources management in the small and middle-sized enterprises. 5. MBO can help to manage the relationship between the enterprises and the government and reduce the agent costs. 6. MBO bears the important task in clearing the property right. 7. MBO can mobilize and release the enthusiasm of the enterprises...