An Empirical Study. Spin-off Listing Of Economic Motivation

TONGRENTANG Co. carved out if s subsidrary (TONGRENTANG Technologies Co.) and came into the Hongkong Growth Enterprise market through IPO On 31th October, 2000. This was the first and the sole company of more than 1000 firms on Chinese capital market which was succeeded in Equity Carve-out. It provided many researchers with a special and practial perspective in studying Equity Carve-out.This paper expatiates two East financial hypothesis that explain the economic causes of Equity Carve-out , then studies the possible economic causes of TONGRENTANG Equity Carve-out. I also tests the reactions of the rivals of TONGRENTANG Co. stocks during the Equity Carve-out announments ,The results sustain Asymmetric Information Hypothesis, If s to say that one economic cause of TONGRENTANG Equity Carve-outis : TONGRENTANG Co. is relatively undervalued but TONGRENTANG Technologies Co. is relatively upvalued before Equity Carve-out, TONGRENTANG Co. is asked to expose more detail financial informations because of Equity Carve-out which reduces information asymmetry. The value of TONGRENTANG Co. is revalued and it is severaltimes larger than it s subsidrary, so the net reaction of the market is positive, Namely:during the announcements of Equity carve-out, TONGRENTANG Co. gains remarkable positive CAR, So Equity Carve-out leads to the enhance of the parent firm' s value.