| Variable Interest Entity(VIE), which is a special kind of protocol control mode and also referred to as "Sina Mode" by insider, emerged when the Catalog of Industries for Foreign Investment was enacted in the 1990 s and companies seek convenient registration and tax incentives. It plays an indispensable role for Chinese enterprises in promoting overseas equity financing, enhancing their strength and improving the degree of internationalization. However, more and more China-related Stocks joined the army of privatization and gradually grew up with stricter adjustment of foreign industry policies, capital market disruption of shorting institutions like Muddy Waters Research, greatly different corporate valuation between Chinese and foreign markets and the introduction and improvement of China’s supporting policies.In this context, we take the Focus Media’s returning to SMEs board as an example and study the problems of returning to domestic capital markets for China-related Stocks. First, we review the related literature why China-related Stocks list on foreign capital markets and privatize themselves and the effect after their returning. Then we briefly introduce the course of events that Focus Media removed its VIE and listed on domestic capital market and analyze the reasons, results and difficulties of removing VIE with Pecking Order Theory and Equity Valuation Theory. Finally, we put forward suggestions in terms of listed companies, national policies and financial services institutions respectively according to the above analyses.Study found that China-related Stocks returning due to the vast value difference between the domestic and foreign markets,and foreign investors are difficult to comprehensive evaluation of business entity and the main business in domestic companies, combined with the national support policies introduced gradually, make the probable returning is behind the capital operation of enterprise development path. |
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