| Valuation adjustment mechanism(VAM)， as a form of contract and a specialkind of investment and financing, is widely used in enterprise investment，corporatefinance, share reform, restructuring, etc. In recent years, with the rapid developmentof market economy in our country, more and more enterprises, especially privateenterprises try to use the power of the foreign capital in the overseas listing, in orderto seek more broad space for development, so VAM gradually comes into people’shorizons, and caused the media a lot of controversy. Using VAM correctly will helpChina’s enterprises to raise funds in the international market, solve the financingproblem our private firms facing to, and provide opportunity for their rapiddevelopment.In VAM, financier is the owner and operator of the enterprise and the investor iscorporate creditor. The two sides bet the corporate equity on business performance. Ifthe enterprise operating performance achieves the goals, the financier wins the betand gets more corporate equity. Otherwise, the investor wins the bet and gets morecorporate equity. VAM can inspire financier to work harder to improve businessperformance and gets equity returns. At the same time, the investor can also getprotected. When the enterprise operating performance is poorer, the investor cangain more equity as compensation，which would reduce the investment risk. In thispaper, we take the case of Morgan Stanley investment on Mengniu Dairy Company,analyze the incentive mechanism for financiers and risk protection for investors inVAM, and point out the characteristics and application condition of VAM.This paper firstly expatiates on related concepts, contents and elaborates basictheory. Secondly, we outline the current VAM application situation, analyze the caseof Morgan Stanley investment on Mengniu Dairy Company, and summarize severalenlightenments for corporate finance in VAM. Thirdly, based on the full textdiscussion, this paper gives some related suggestion on corporate finance by VAM. |
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