MBO Theory And Its Application In China

To further the reform of state-owned enterprises and establish modem enterprise system is the main part of Chinese economic reform at present time. Chinese state-owned-enterprises (SOE), especially those medium-sized and small enterprises, are still in difficult situation. Seeing from this fact, we can deduce that there must be a factor of the institution, which is, in my opinion, the ownership problem.Management Buy-out (MBO) is a new mode based on the traditional theory of merging which has made a very positive contribution to the economic development in England and USA in recent 20 years. MBO is not only a way of financial innovation, but also a good tool for stimulation. Because of its positive effect on building definite property right and stimulating management in SOE, MBO, which originated in western countries, has became popular in China and reached its climax in 2004. However, a dispute between a scholar of Hong Kong named Larry. H. P. Lang and a businessman named Chujun Gu causes a large scale discussion in academic world on whether MBO is needed, whether Chinese economic reform on property could be feasible and so on. The main focus of the discussion is that MBO in reality has brought loss of state assets and that some relative sides, like employees and small stock holders, lose their due interest in the MBO process. So, are points in the discussion all reasonable? Is MBO in china the same with that in western countries? Has MBO had its due positive effect in China? Aiming at these problems, this thesis focuses on studying the feasibility of MBO in China, problems that MBO encounters in reality and ways for MBO to break through.The thesis starts from introducing the evolvement of MBO in western countries, then states and analyzes the discussion about MBO in academic world. After this, it shows main problems that MBO encounters in reality through a case study of MBO in a big SOE. In the end, it provides ways to further SOE reform on property right. The conclusion of the thesis shows, the success of MBO in England and USA is based on the maturity of market and legal environment and the definiteness of property right, which have not been attained in China. Sheer imitation can just lead to loss of state assets and unfair distribution among relative sides. However, we can not give up SOE reform due to those problems. For one thing, SOE reform on property right is still the main direction of economic reform;for the other thing, the key toimplement MBO is to improve institutional environment and build up democratic procedure which every relative sides can take part in. In this way, MBO can have its positive effect on Chinese economic reform.The thesis uses many study methods like comparison, case study and normative analysis. It aims at revealing defects in MBO theory and its application and providing ways to further SOE reform. Therefore, the thesis must have positive meaning for understanding MBO correctly and furthering SOE reform.