Research On The Decision Of Privatization Of Chinese Concept Stocks

Since 2010,more and more overseas listed Chinese firms have taken the initiative to withdraw from overseas capital market by privatization and this phenomenon has been formed a wave gradually.In 2017,Zhaopin,who landed in the NYSE for less than three years,had been successfully completed the plan of privatization under the control of the controlling shareholders,adding new blood to the army’s privatization force.What prompted Zhaopin to make such a big decision? Currently,there are a lot of Chinese companies that are in the same position as Zhaopin,so for these companies.Should the controlling shareholders also make the decision to withdraw from the market? What factors should be considered when the controlling shareholders make the decision?To study the above questions,I establish the firm value model to simulate the weighing process of controlling shareholders’ overseas withdrawal decision.It is found that the controlling shareholders should take the net cash flow of the enterprise into considerition.When the controlling shareholders taking the maximization of enterprise value in to decision,there is a net cash flow critical value.When the enterprise’s net cash flow is greater than the critical value,the controlling shareholder should choose to continue to carry on the overseas listing,otherwise,the controlling shareholder should opt to privatize.The net cash flow threshold is affected by the cost of capital,the ability of the enterprise to obtain net cash flow,and the cost of maintaining the overseas listing.Finally,through the analysis of the privatization case of Zhaopin,this paper further indicates that the maximization of enterprise value is the important basis for controlling shareholder’s privatization decision.The results of this study show that Chinese concept stocks have to consider its own reality,and compare the cash flow,capital cost and investor protection before and after the delisting.Then choose the best time to withdraw the market to maximize the value of the enterprise.