The Research Of Performance Of Equity Carve-out

In the1960s, the western countries’ economy developed rapidly. The industries were booming, thus a lot of corporations became strong during this period. Because of the aggressive competence, most of the corporation expanded their business scope which we called diversify to decentralize their operating risk and gain more operating income. Since then, there comes a lot of big companies and groups.After the wave of diversification, those big groups found that due to the different characteristics of business development, inconsistent management method, diversification would lead to diminishing marginal effect, resulting in diseconomies of scope. In that case, many enterprises began tightening restructure. The equity carve-outs was one of the restructure method.Research in the equity carve-outs is more common in the west countries because carve-outs develops slowly in China due to the policy restriction. In this article, we will build a performance evaluation system of the equity carve-outs in two aspects which is from financial and nonfinancial indicators. After that, we will introduce a case to support the system we have built.In the first three chapters of this article, we described the relevant background, explain the research theoretical basis, find the reason why enterprises choose equity carve-outs, and conclude different types of this kind of restructure. On the basis of summing up researching results obtained by other scholars, this paper puts forward questions proposed to research and researching method.In chapter4, an index system is designed to evaluate the performance of enterprise after their equity carve-outs. The financial index was built to evaluate the liquidity, operating ability, profitability and development potential. At the same time, the index such as the volume of business, the human resource, the change of enterprise’s scale, and the acceptance of society are included in the non-financial evaluation system. In the chapter5, we introduced the case of COFCO International Limited and China Agri-Industries Holdings Limited. After researching the performance of both parent company and subsidiary, we supposed the company never experienced carve-outs, and put the two companies together as a whole, and then compare with, the company before.In the last chapter, we concluded the researching results and gave some advices. After analysis of the previous chapter, we find that there are some positive effects on the companies’ solvency, management ability, although the impact is modest. There is almost no impact on the companies’ profitability and potential capacity. In the non-financial aspect, we find that the companies’business capacity developed fast, and the scale expanded. In addition, the salaries of employees have increased, which reflects the incentive effect of carve-outs on employees.However, the non-financial evaluation system built in this article may lead to different results in different cases. The general applicability may need to be further verified.