An Empirical Study On The Impact Of Management Buyouts Of Chinese Listed Companies

The past reform of state-owned enterprises in China has delegated many effective control rights to managers while maintaining ultimate control rights for the government. In order to improve the essential performance of state-owned enterprises, promoting new private or non-state enterprises is very important. Management Buyouts in China was original an experiment that government retreat from control over enterprises. It was not pure market behavior, but was in the wave of institutional reforms in China.This paper is an empirical study on the impact of management buyouts of Chinese listed companies. This paper studies 40 MBO events happened between listed companies in China during 1999 to the year of 2002. Empirical results show that the MBO firms'performance were of higher level than the average of non MBO firms in the same industries and the same financial report period before MBO event with statistical significance. And the performance was still higher in the MBO events happened year with statistical significance. But after MBO happening the higher performance is not significant.Others exploring studies have been done to find the characteristic of the MBO firms'behavior. Empirical results show that after MBO happening, the MBO firms were in short of financial slack and the debt capacity became lower. The MBO companies had fierce motivation to distribute bonus. In this paper we also manifest advantage in earning power of MBO companies.This paper draw a conclusion that management buyouts are not bad thing in China. It could reduce high agency cost in some extent.