Chinese Stock Market Exit Mechanism

China's stock market has developed rapidly since the day of its establishment. However, as the number of listed company as well as the amount of financing keep on rising, a strange phenomenon also appears:The first delisted company didn't come into being until 2001,which means our stock market has been in short of exit mechanism for more than ten years. This is in sharp contrast to that of stock markets overseas. As the central component of a nation's economy, the stock market plays an essential role in resource distribution, and "the fittest survives" is always a principle which is generally accepted in market economy, our stock market can not distribute resources effectively with the "bad" listed companies still exist while many other qualified companies are waiting anxiously outside to be listed. Why China's stock market is in lack of exit mechanism for such a long time? And what can be done in order to construct and improve the exit mechanism in our stock market? This thesis was written in order to analyze as well as answer these questions. In this thesis, firstly, the concept of exit mechanism and the importance of the establishing exit mechanism are brought forward; secondly, the barrier which exists when exit mechanism is brought into effect is discussed; thirdly, several methods are put forward to promote the construction of exit mechanism. This thesis consists of three chapters. In ChapterⅠ,the concept of "exit" discussed in this thesis is defined as follows: The shares of a listed company are no longer permitted to trade in the stock exchange since this company is unable to fulfill the sustaininglisting qualifications of the stock exchange. In overseas stock markets that are more mature, it is very common for a company to be delisted from the stock exchange, and statistics shows that more companies were delisted than newly listed in more than half of the main stock markets in the world in 1999. It is generally agreed that the exit mechanism will be beneficial to the sustainable development of a securities market. It will help to distribute resources more effectively, to optimize corporate governance of listed companies and to reveal the risks of investment to the investors. So it is of great importance to establish "exit" mechanism in China's stock market.Chapter Ⅱis divided into two parts. The barriers of the exit mechanism are discussed in the first part. Firstly, the local authority of the listed companies is unwilling to see a listed company of his precinct be delisted, since the qualification of going to the market is really hard to acquire under the Quota System, which means the total quantities of shares issued next year will be determined in this year and the quota will be divided into many parts and then dispense to each regional authority. If the company is delisted, then its value will disappear. Furthermore, the performance of a listed company reflects more or less the economic development of the region that it is from, so the cancellation of delisting implies shame to the local authority. Secondly, the shareholders do not wish to see companies delisted, since the liquidity of shares will be largely affected after delisting due to the lack of effective trading market for them. Thirdly, for some companies, they may face bankruptcy after they are delisted as the liability exceeds asset, and the creditor will face serious loss, sothe creditor will try his best to avoid his debtor being delisted. Fourthly, the listed company itself will be averse to delisting, since it has gained great advantages after being listed, and it will be deprived of all its privileges when delisted. In the second part, this thesis tries to find out the essential reasons for the difficulties in the establishment of the exit mechanism. In the author' opinion, it is the excessive intervention of the government in the stock market that made Directly Unproductive Profit-seeking and Rent-setting possible. In practice, it is manifested as Quota System and the structure unbalance between SOEs and...