Research On The Rationality Of The New Withdrawal Mechanism For China Listed Companies

The delisting mechanism for China’s listed companies which launched in2001has experienced the process of something out of nothing and always continuing improvement. However, the virtual effects were still not satisfactory for several years. The reason is underlying the loopholes and defects of old delisting mechanism, which results in plenty of underperformance companies still being presence in the market. In2012, both Shanghai Stock Exchange and Shenzhen Stock Exchange announced a new delisting mechanism for GEB, Main Board and SME Board. The new mechanism has included indicators for net asset as well as market transaction. Meanwhile, principles which related to non-recurring gains and losses were added. All of these changes have made substantial improvements for delisting mechanism. This article will mainly focus on the three new added indicators and certificate their necessity and rationality theoretically and empirically by choosing appropriate econometric model. The final result supports ’non-recurring exclusion’ criteria as well as net assets indicator included in delisting mechanism whereas the effect of volume seems to be doubtful. Finally, I assume the new delisting mechanism implemented in the whole stock market and measure the virtual effect and improvement of new mechanism compared with old one through the judgment rule of’appropriate delisting ratio’,’appropriate stock price changes’as well as’favorable investment atmosphere’ by calculating the changes in’market’s delisting ratio, the adjustment of the level of market PE as well as the difference of market average turnover ratio.