An Empirical Research On The Delisting As “Going Private” Of US-Listed Chinese Companies

Since 1990 s, being attracted by the characteristics as ‘low barrier and loose regulation', plenty of Chinese companies, good ones and bad ones,managed to list in the capital market of United States through IPO or reverse-merger, which was referred to as stocks with concepts of China. Though there was hot pursuit for these companies under the halo of ‘China mode', some risks were neglected. Around 2010, some Chinese companies were revealed of accounting scandal and poor corporate governance, which caused server undervaluation and strict investigation by SEC. It was under this circumstance when Chinese companies rushed to get delisted, both voluntarily and involuntarily. The trend has not been turned until today. This article uses US-listed Chinese companies which announced to go private during 2013 and 2015, in both qualitative and quantitative ways to investigate their performance pre-and post-announcement, especially the determinants of premiums of the going private proposals.This article firstly digs into some major streams of theory concerning going private, and proves that, though there are some differences between the sample and those companies in the privatization trend before 2013, in aspects of market capitalization and industry structure, they still share the same motivation for going private: undervaluation. After verifying the motivation of going private, this article continues to test different hypothesis. It innovatively applies multiple proxy variables for regression model to analyze the determinants of premiums of Chinese companies' going private transaction, and comes to the conclusion that the key factors determining premiums are the degree of undervaluation and cash holding percentage of those companies. Corporate governance and litigation risks don't significantly influence the premiums of going private proposals. Then this article makes a brief analyze of ‘announcement effect' after the going private proposal, to both conform the widely existence of ‘announcement effect' and it being determined by the size of the premium, thus supporting that the going private proposal can make great correction of investor's anticipation for the stock price.From here this article goes further to search for a reliable way to predict the success of going private proposal. It proposes a binary logic regression involving a couple of proxy variables but fails to make reliable prediction. Even though this, it takes an overview of some factors which may affect the success or not of the proposal thus to provide a suggestion for later research.The timeliness of data of the sample and multiple proxy variables are the main innovations of this article, while its shortcoming is that the sample excludes companies from OTCBB, so the conclusions may be lack of explanatory power to some extent.