Institutional Environment, Refocusing Divestitures And Enterprise Value

With the dramatic changes of economic, corporation need adjust business portfolio frequently, and the same with M&A, divestiture is a reasonable choice for corporation to highlight competitive advantage and realize strategy transition. Especially since 2008, under the pressure of external environment, selling off have continued to grow, both the number and the size of the enterprise. However, compared with the increasing corporate divestiture practice in reality, the existing literature on the divestiture is not enough, only literature also focuses on divestiture agent and overall performance, empirical research on the relationship between specific types of divestiture and enterprise value is rare. Institutional environment is the external environments of corporate governance, affecting the company’s decision-making mechanism, and to provide necessary technical and financial support, so it has a significant impact on enterprises investment behavior or decision-making. Domestic scholars have do some research about the relation between institutional environment and M&A, but the study about influencing on divestitures value is very poor. Divestiture has its own characteristics and laws, and expansionary M&A activity cannot treat as the same, just analyses the institutional environment and M&A cannot clearly reflect the influence of the institutional environment and the value effect of divestitures. Therefore, for making up the research blank, this paper mainly studies the following problems: First, how does the refocusing divestiture influence the enterprises value; Second, what kind of impact will those refocusing divestiture be on the enterprises value when under the institutional environment, including the regional differences in the cross section and the change of the system caused by the longitudinal time variation.In order to examine the value effect of the refocusing divestiture, the paper selects the only one time divestiture activities happened in that year between 2002 and 2011 from A shares in Shanghai and Shenzhen Stock Exchange as a sample; On the basis of reviewing divestiture announcement, manual collect the refocusing divestiture according on a certain selection principle;adopt BHAR(Buy and Hold Abnormal Return)to calculate the long-term performance of the sample firms;And establish a Logistic regression model to analyze the relationship between the refocusing divestiture and the enterprise value. For verifying the influence of external institutional environment on the value effect of enterprise’s asset stripping, the paper also joined the institutional environment, from the horizontal regional system and the vertical system change, choose classification comparative analysis and regression analysis of interaction terms, to explore the institutional environment on the value effect of the enterprise.The study found: First, refocusing divestiture can create enterprise value, for relieving agency problem of the diversified complex structure, eliminating negative synergies, help highlighting the main business, and improving the efficiency of management. Second, the improvement of the institutional environment for the value effect of refocusing divestiture is positive adjustment, for detail,: the higher the degree of marketization of the region, the higher performance can be, for the market information accuracy and a good legal environment to form a powerful supervise for management, the cost can be lower of refocusing divestiture when realize the resource optimal allocation; the refocusing divestiture can achieve higher performance after the split share reform, for the decision-making mechanism is more complete, and the transaction pricing is more reasonable. This paper explores the relationship between refocusing divestiture and enterprise value under the unique institutional environment in our country, based on the research conclusion, this paper argues, on the one hand, the listing Corporation should pay attention to refocusing divestiture, focus on the main business, "retreat" should be included in the company’s long-term development strategy, to improve the internal synergies through divestiture, achieve the effect of “2-1>1”and enhancing corporate value; on the other hand, the government should promote the process of market and improve the efficiency of capital market, administrative organ should reasonably define the scope of functions; agency should strengthen monitor and support auxiliary behavior to the refocusing divestiture of company, the legislative body should improve the laws and regulations construction; CSRC should pay more attention on the related transactions, information disclosure of listing Corporation, reduce the non-market factors in the process of asset stripping and realize the optimal allocation of resources in many ways.