A Research For Financial Performance Of China Listed Companies’ Divestiture

Just as mergers and acquisitions, corporate divestitures have beenaccompanying the growth of enterprises. Since the establishment ofmodern enterprise system, divestiture has been among common enterprisecapital operating ways. It has played a very important role in aspects suchas adjusting business structure, changing business direction, and gettingrid of the plight of business. Since late nineteenth Century, Westerncompanies have experienced five major merger wave. In2008, a suddeneconomic crisis, swept through every corner of the world, a merger wavegreater attendant. In this context, many scholars have carried on thetheoretical and Empirical Analysis on asset divestiture from variousaspects, results show that the divestiture can improve corporate financialperformance. In China, researches on divestiture start rather late. In the90s of last century, the establishment and development of China’s capitalmarket and the restructuring of state-owned enterprises provideconvenient conditions for empirical research on divestitures in China. Asthe rise of the empirical research of this century, Chinese scholarsconducted an empirical study on divestitures through methodology ofevent study and accounting study. However, with regard to what kind ofimpact divestures could have on corporate financial performance,scholars did not reach the same conclusion. This paper aims to assess theimpact of the divestiture on enterprise financial performance from anobjective perspective through empirical research.First, the background and the literature related to divestitures werereviewed, analyzed the current situation and the results of relevantresearch at home and abroad. In chapter two, this paper describesdivestitures theory from the point of view of economics and managementscience, explores relevant theories that support the divestitureimplementation, hoping to provide a theoretical basis for the empiricalanalysis. In chapter three, taken68companies as the research objectwhich had gone through divestitures between2008-2010, from fouraspects which are solvency, asset operating capacity, profitability,development capacity, carries on factor analysis on9the financial indicators of the sample companies such as the current ratio, operatingmargin, etc. Integrative financial performance score is calculated beforeand after the divestiture, while variation of the individual financialindicators are calculated and tested before and after the divestiture. Theresults show that the sample Company’s general financial performancehas significantly improved after divestitures. Besides, individual financialdata of the sample companies has also improved, but not all of thechanges are significant. At last, this paper summarizes the results of theempirical analysis, and put forward some suggestions for enterprisessupervision department, regarding the drawbacks in present divestitureprocess in our country, hoping to provide a reference of divestiturespractice.