An Empirical Study Of MBO Performance For Chinese Listed Companies

Management Buy-out (MBO) is the company management teams buy their own company's part of or most shares through providing funds to control the company. In the west, MBO originated from the seventies of the 20th century, reached the summit at the end of the eighties. A large amount of empirical study that foreign scholars have done indicate the management performances of MBO companies have obviously improved. MBO can create premium income for the shareholders, and the continuation of this kind of income is very strong.In our country MBO began with Stone, Midea first, and became the market focus gradually in 2001. By the beginning of 2003, the number of the listed company which can have the control by administration and supervision authorities or employee stock ownership meeting through MBO have already reached a two-digit figure. It is the property right reform of state-owned enterprise and strategic reorganization of the state-owned economy to expedite the development of MBO. To a certain extent, MBO have become one of the three main channels through which the state-run assets withdraw. The other two are merger with foreign capitals and that the state-owned enterprise be acquired by enterprises run by the local people. State-owned Assets Supervision and Administration Commission of the State Council and Ministry of Finance announce on April 14th 2005, forbid the large-scale state-owned companies to implement MBO, but allow to transfer property rights of medium and small-scale state-owned companies to management teams. Because of our country's special national conditions, MBO is winding its way toward standardization gradually.Whether can MBO enhance management performances, create wealth for shareholders in our country as the foreign companies do? Based on the forefathers'study of MBO, this paper selects 20 representative MBO listed companies to do empirical study, attempting to compare the cash flow financial index before they implement MBO with the corresponding index after they implement MBO, and analyzes whether MBO has improved listed companies'efficiency. We adopt the common approach"event study method"in financial analysis, compare the change ofshareholder's wealth and Tobin' s Q value of listed companies before and after implementing MBO, investigate whether MBO could improve the market value of the listed companies; Finally according to empirical study this paper works out the conclusion: Domestic MBO can not improve management performances, nor create the wealth for the shareholders, in the mean time, pointing out the problem that the listed company MBO of our country exists at present and putting forward the corresponding countermeasures.