Studies On The Supervision Of Backdoor Listing In China

Listing in the capital market has so many benefits,such as rapid financing,lowerfinancing cost,and also to improve the company’s reputation.Therefore,financing inthe capital market becomes a hot means that lots of companies which have certainscale could select.At present,there are two ways to enter the capital market inChina:the one is intial public offering(i.e.IPO),and the other is backdoor listing.Forlisted shell company,backdoor listing can optimize the allocation of resources,andavoid being removed from the market.For unlisted company,compared toIPO,backdoor listing has lower standard,more simple procedures,faster,and lowercosts.So backdoor listing becomes a choice that many companies who want to enterthe capital market.With the development of capital market,backdoor listing had been supervised asa means of asset reorganization before2007.In2007,the standard of backdoor listingwas defined,although the standard was similar with IPO,it was still lower.In thispaper,it reviews the regulatory policy relevant with backdoor listing in Chinese capitalmarket systematically from the first one which published in1998,I also analyze andsummarize the changes among them combined with the development in themacroeconomic environment.In2013,China Securities Regulatory Commission(i.e.CSRC) issued Notification about Backdoor Listing Standard Equal withIPO,clearly announced that the standard of backdoor listing was equal with IPO’s.The orientation of policy became clear,as a result,lots of companies began to researchthe current policy,many backdoor listing in curve cases appeared.The study choosestwo backdoor listing in curve cases which occurred after the policy issued.The firstone is that a GEM company called Skyray Instrument mergers Yuxing Technologywho is larger than the prior.By designing a skilled scheme,it cleverly avoids thebackdoor listing standard,but actually it can achieve its purpose of backdoor listingfinally.The other case is that Juhua Group purchases Feida Environmental Science&Technology and injects asset in it.The scheme avoids the backdoor listing standardwhich is the same with IPO. Backdoor listing can open up financing ways,optimize the allocation ofresources,accelerate the establishment of modern enterprise system,deepen theeconomic system reform,promote the development of capital market.But it also hasrisk,and may bring some negative impact on capital market without policing.Byanalyzing the cases,a conclusion can be drawn,that is,there are many defects with thesupervision on backdoor listing.It is essential and necessary to strengthen thesupervision of backdoor listing.This paper points out the supervision defects byanalyzing and summarizing,and gives some recommendations.