| In the1990s, structural reform of financial and banking system began in china. Central government cut down the fiscal subsidy for the state-owned enterprises, making the planned economy exposed the shortcomings. State-owned enterprises suffered large-scale losses. In order to settle the matter, the government began to encourage the privatization of the state-owned enterprises. Management buyouts (called "MBO" for short) appeared under this circumstances. In Chinese special market environment, earnings management is often used to cater for the supervision or evade it. In2002, government hold an acquiescent point of view on MBO; in2003, the examination and approval of MBO was stopped; then, along with State Asset Regulatory Commission came into existence, a series of policies came into effect; in2005, the MBO in small and medium state-owned enterprises was lifted a ban, while the ban on MBO in large state-owned enterprises remained; in2006, the government define the attitude to management shareholding in large state-owned enterprises as not forbidden. Nowadays MBO is feasible to some extent.In recent years, the co-existence phenomenon of the fat salary and high crime rates makes that the public concerns about entrepreneurial behavior continue to heat up. MBO appears in the privatization of the state-owned enterprises and then becomes the production line of millionaire. In2004, Larry H.P. Lang’s comment caused great public criticism on MBO and enabled our government to further improve the relevant regulations. In2007, management buyout seemed to disappear in favorable policies, which is unknown that10listed companies had completed the MBO quietly from2009to2011. In the past years, the financing conditions have relaxed after financial crisis, the public investors’sense of self-protection has further strengthened, and the so-called "Owner absence problem" has been resolved. As the social and legal environment has changed in china, MBO is not what it used to be. But in the academic field, the research of earnings management based on management buyout is inadequate. When practice is far ahead in the face of research, it is necessary to strengthen the empirical research, in order to learn lessons and take preventive measures. This is the purpose of my research.In this thesis, empirical research method is used to study the phenomenon of earnings management during management buyout in Chinese listed companies, specifically divided into the following five parts:Part Ⅰ:Introduction and Literature Review. In this part, I summarize predecessors’empirical research methods of earnings management to determine mine, and elaborate previous studies on earnings management of Chinese MBO to determine my research emphasis.Part Ⅱ:Theoretical Review. On the one hand, define "Chinese MBO" and sum up the three viewpoints about MBO as wealth creation, wealth transfer and middle of the road. On the other hand, define earnings management and sum up related motivation.Part Ⅲ:Present State of Chinese MBO. Select74listed companies which implemented MBO in the period from1996to2011. This study find that:(1) the number of MBO reached a climax in2004, than declined, and in recent years showed a recovery trend.(2) The vast majority of enterprises (74.33%) belong to the secondary industry, which has a large number of assets which can be used as collateral, has a potential to improve the efficiency, and can easily win support from the local government.(3) The modality of buyout is predominantly one-to-one consultation (83.78%), which can obtain more favorable purchase price.(4) Instead of purchasing the shares of listed companies directly, Chinese MBO presents the characteristics of complex, curve,"passive" and formal.(5) Managers gained high surface profit and potential one during buyouts, which was the real motivation of MBO.(6) In order to obtain the funding, some entrepreneurs transferred funds from the listed companies with high cash bonus and related party transactions. In this part, the relevant policies and public opinion since1999have been summarized to better understand Chinese policy-oriented MBO.Part Ⅳ:Empirical Research. Based on arbitrage process and previous studies, I put forward three hypotheses:H1, the phenomenon of downward earnings management exists in the year of and the year before MBO. H2, the phenomenon of upward earnings management exists in the year after MBO. H3, non-recurring gains and losses is used to manipulate earnings during the process. After raising the issue, I select a sample of57listed companies which implemented MBO in the period from1999to2010. The year of MBO (t=0) is fixed on the year of signing the equity transfer agreement. The modified Jones model is introduced to this empirical research during the long study period from t=-3to t=4. After the empirical test, I found that there are some differences between the findings and the hypothesis:H1is supported, which means that managers reduce the profitability and the net assets of the listed companies, in the purpose of cutting down the acquisition price; H2is denied, probably because MBO have become a complex long-term operation instead of a direct short-term one. In this way, it is more likely to be accepted by stakeholders; H3is not supported, which shows that the use of non-recurring gains and losses in manipulating earnings among the MBO process is not widespread. Besides, the various causes of earnings make it difficult to determine whether it is related to MBO. The last but not least, with the cost of getting out of the line increasing about non-recurring gains and losses, managers adopted a more cautious attitude.Part Ⅴ:Conclusions and Recommendations. Based on the findings in the empirical research and the problems found in the present state analysis, I put forward my own proposals. First, a complete set of laws and regulations for the MBO should be proclaimed, especially in the area of definition, pricing, financing and disclosure. Second, the construction of support mechanisms during the process of MBO should be completed, especially in the area of executive compensation, high dividends, related party transactions and risk control. To some extent, MBO has become a trend. Within the scope of law and morality, MBO should be recognized. But managers should be punished as a warning when they implement MBO making use of legal loopholes for the personal gains. By improving the legal system, we will remove the Chinese characteristics from MBO and then put it back on track.This thesis has the following main contributions:(1) In view of many variants in recent management buyout, redefine MBO as Chinese policy-oriented MBO.(2) Provide empirical data for the following studies. The data is about the industry classification, time course, specific method, the acquirer, and the related nature of equity, control level and the proportion of control after buyout, etc.(3) Enhance the details of empirical research by complicating the selection of MBO samples and matching ones, identifying the exact time of MBO and extending the study period to eight years.(4) Provide empirical support for the arbitrage process and the view of wealth transfer on MBO.The main limitations of this thesis are:(1) the sample may be incomplete, because of information constraints.(2) Not applying the specific accruals method for the analysis of highly targeted. |
PDF Full Text Request