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Study Of Management Buyouts In The Context Of China's Transition

Posted on:2004-11-11Degree:MasterType:Thesis
Country:ChinaCandidate:G X FuFull Text:PDF
GTID:2206360092485107Subject:Finance
Abstract/Summary:PDF Full Text Request
As a financial transaction in the market, MBO (management buy-outs) came into being in U.S. in 1970s and swept over Europe rapidly. And as an institutional imitation in the course of transformation to market economy, a number of cases of MBO began to emerge in China after the first case of Beijing stone organization. The discussions about the techniques know-how of MBO have been so common but the economic explanations and comments of MBO under the special transformation background are few. Under the background of economic transformation, This paper, by means of the theory of instrument about enterprise, ownership and institution transformation, answers the following questions: 1.Why does MBO appear in this particular period and in what form does it appear in China? 2. What barrier has MBO confronted in China and how to solve it?This paper breaks into four parts.Part one sums up the definition, evolvement history and basic meanings of MBO. Generally speaking, MBO means that the top management of target companies purchases the stock or assets of their own companies through Leverage Buy-Outs in order to change the corporation's ownership structure, controlling right structure and asset structure, with the ultimate goal to gain the expected earnings. Part two makes an economic analysis on MBO from five aspects, including the motivation of MBO, the evolvement of enterprise institution, the functions of entrepreneurs, the governance of company, the selection of transaction in MBO. The paper points out: (1) MBO is a self-protecting means for the management to avoid the "quasi-rent" of their human capital from being plundered. And the advantages of information gifted motivated MBO largely. (2) MBO is a rebellion to modern enterprise institution with the characteristic of the property rights separated with management rights. Such rebellion has originated from the beginning of the separation. (3) MBO will become a way to reduce agent cost and optimize the allocation of resources on the precondition that forfeiting of efficiency will not decrease, when the management who have an excellent ability in operating, change their identity and become the owner of the company by the support of financial institution. (4) MBO is a supplement to the structure of company governance and an ultimate means to resolve inefficient investment. (5)Usually, the management will disperse some untrue information by concealing their genuine ability to depreciate the value of company in order to improve their negotiating ability in MBO. Part three makes an empirical analysis about China's MBO. Firstly, the paper emphasizes that China's MBO occurs in the third stage of enterprise reform in the course of the Chinese transformation to market economy. In this stage, the problem facing us is not whether we should have property reform but by what means we can carry out the reform with the lowest cost, which is the basic background of the research about Chinese MBO. Secondly, the paper describes Chinese MBO in details on the base of case study about five typical companies. Thirdly, according to the theory of institution transition, the paper points out that the emergence of MBO in China is a kind of induced institution transition. There are two institutional factors leading to the emergence of MBO in China. One is the change of institution aggregate, namely, the expanding of people's cognition and the revision of the government's policy; another is the change of the relative price of product factors, which means that the value of human capital has become larger and larger with the processing of market economy in China. Finally, with the common characteristics of MBO in market economy as a basic comparing frame, the paper puts forward the special characteristics of MBO in Chinese transformation economy and concludes that MBO in China is committed to transformation economy, thus having an obvious transforming characteristic. Therefore, the character of Target Company and tactics of operation means of MBO in China at present stage is not the same w...
Keywords/Search Tags:MBO, transformational economy, enterprise institution, institution transition
PDF Full Text Request
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