Financial Issues, Management Buyouts Of Enterprises In China

With the permeation of economic globalization and the development of China's openness to the outside world, Management Buyout, one of the widely used property-right operation modes in western countries, came into China. The registration of "Beijing Stone Investment Co., Ltd." on May 13, 1999 marked the threshold of MBO in China. Subsequently, more and more enterprises tried to nudge into the list of MBO, and in 2002 the implement of MBO reached a climax in China.It has proven that MBO played an active role in clearing property right of enterprises, improving internal incentives, and reducing agent cost. In China MBO can help the state-owned capital strategically retreat from the general competitive fields, provide solution to the problem of "Owner Absence", which has disturbed the state-owned enterprises (SOE) for many years, and smoothly transfer the SOE from present mode to modern corporate system. Series problems, however, appeared during the process of carrying out MBO in China. For example, the trades went unpublicized, the prices of trade were underestimated, or the sources of funds for purchase were illegal and so on. Ineffective supervision and improper operation, to great extent, contributed to the loss of state-owned property.Is MBO a wrong or a right prescription for the symptom of SOE? It seems that MBO has run into a dilemma with the drastic argument between the proponents and the opponents. Although the implement of MBO in China has brought some problems in its wake, we have to admit that some enterprises became strong with the help of acquisition, and the pace of China's reform should not be hampered because of the temporary problems. Lack of a mature mode of MBO in China, we should be active to explore more possible solutions to the problem so to make sure that the development of MBO can be kept into a normative track in the long run.Why is the way for developing MBO in China so hard? What on earth has driven MBO into a dilemma? What kind of short-term strategies will be possible according tothe present situation of our country? And what is the proper orientation for the long-term development of MBO in China? How should the healthy soil for MBO be cultivated? This paper focuses on financial problems on China's MBO and deeply analyzes the problems of pricing and financing for MBO from the perspective of accounting and finance. Through analyzing I try to explain the questions above and put forward some reasonable suggestions.