A Study On Motivation And Economic Consequences Of Chinese Concept Stocks Withdrawing From Stock Market

Listing can bring a number of benefits to companies,this way the company can obtain capital from the capital market,using stock-based compensation incentive programs and strengthen corporate governance.Compared with the United States,the domestic listing threshold is higher,and similarly with higher waiting time cost.So many Chinese enterprises,especially high-tech enterprises in the fast-growing period,chose the more developed capital market financing,that is,U.S.capital markets.However,in recent years,Shanda,Qihoo 360,Focus Media and other Chinese stocks on behalf of the concept of shares are setting off a wave of privatization of delisting,only in 2015 there are nearly 30 companies in the stock market has received privatization of the offer.In order to find out the motivations and economic consequences of the privatization of Chinese concept stocks,this paper,on the basis of summarizing the related literature,based on the theories of free cash flow,underestimation of market value,transaction cost theory,tax saving theory and control theory,this paper analyzes the typical cases.of Qihoo 360 enterprise in detail.And then draws a conclusion from the case analysis of the Chinese concept stocks of the privatization in the United States from 2010 to 2015.It also reveals the motive and consequence of privatization delisting,and provides appropriate recommendations in the stock market delisting system and Chinese companies.The results of this paper show that:(1)the main motive of privatization is to reduce the free cash flow to reduce the agency costs,and to avoid the market value of enterprises is undervalued;(2)the privatization of enterprises may also be out of tax savings,reducing transaction costs,centralized control,the United States and the Chinese environment considerations;(3)the privatization of private enterprises may have positive economic consequences,in addition to the privatization of the stock at a premium buy-back,the announcement of the privatization of the stock also brought a significant impact on the stock market of the positive market response.Based on the above research results,this paper suggests that:(1)enterprises choose to privatize needs to make choices out of their actual needs,trade-off the cost and benefits,and consideration the timing of delisting.(2)enterprises need to recognize the privatization of delisting decision-making on the enterprise itself,brought about the possible consequences of privatization if the decision properly,will be conducive to the rapid development of enterprises themselves.(3)China’s capital market needs a sound delisting,listing system,to strengthen the already privatized,to be privatized Chinese concept stocks enterprise guidance.These suggestions have positive enlightenment to the enterprises that want to be privatized and those who intend to go public overseas,and also provide some theoretical support for the supervision departments to perfect the capital market delisting system.