The Correlation Analysis Between Asset Stripping Motivation And Performance Of The Listed Companies In China

Asset stripping is one of the important ways of Corporate Restructuring. Western countries have done in-depth researches in the application of corporate asset stripping during their long-time practice of market economy, and haved formed a relatively systematic theory of asset stripping. However, there is much less research literature on asset stripping in China, and most of them are about how state-owned enterprises could strip their non-operating assets, which is not consistent with the foreign contents of asset stripping.And empirical research on asset stripping is even less.This paper observes the impacts of stripping activity on corporate performance from the perspective of asset stripping motivation, using plenty of data and materials collected from the securities market, and utilizing those more mature results of study in Western academic world as the theoretical model and statistical analysis method. Finally, this paper provides some recommendations on timely choice of corporate asset stripping. This paper gathered and summarized the sample of all industries based on the listed companies' asset stripping incidents in China from 2005 to 2006. The writer selected machinery, equipment,and measuring instrument industry, which are most active in stripping, as the research object, and finally got 68 effective samples after sample screening by certain standards. According to the information disclosure of samples in their stripping announcements, the writer classified the samples into four categories of motivation, and raised four assumptions correspondingly. This paper uses event study method to do empirical study, and take accumulated abnormal return as the indicator to evaluate effects.Through researches, this paper holds that different stripping motivations could actually cause different market reaction. Specifically speaking, first, optimizing asset and increasing asset mobility would bring along with significant increase in corporates' short-term market performance. Second, adjusting strategy and defining main bussiness clearly could lead to a rapid rise of market performance in a short period with a limited scale. Third, selling assets of low profitability could not obviously increase the corperates'short-term market performance. Forth, alleviating the burden of debt and change the financial situation could not improve the short-term market performance.According to the conclusions above, this paper raises the following recommendations for domestic corporates. First, improve domestic coporates' and related investors' attention and understanding of asset stripping. Second, thecorporates should be aware of the suitable business condition for asset stripping.Finally, the writer makes some necessary explanations on the paper's limitations and the direction of further research at the end of this paper.