Motivation And Effect Analysis Of Buying Shell With State-owned Capital

In recent years,the performance of China's capital market has been sluggish,which is due to the impact of the Sino-US trade war.In addition,the domestic capital market regulation is relatively strict,coupled with the tight leverage policy,making the whole A-share market very inactive.But even in this relatively downturn period,since the middle of2018,state-owned assets have begun to enter the market.Especially in August and September,cases of state-owned assets buying shell frequently occur.In 2019,41 private listed companies injected State-owned assets.Buying a shell with state-owned assets and entering the market is not only a commercial acquisition,but more importantly implies that the state will strengthen its control and operation of the market and industry.These acquired companies are usually facing problems such as debt crisis,pledged liquidation,and continued deterioration of fundamentals.By acquiring these listed companies,local governments have achieved the goals of helping the troubled companies,regulating the local economy,helping the industry develop healthily,and enhancing investor confidence.Based on various considerations,this article selects the event in which Shenzhen Investment Holdings Co.,Ltd.has invested in Eternal Asia as the object of analysis,and explores the impact of buying shell with state-owned capital on corporate performance.This article introduces the basic situation of the two sides of the merger and acquisition and the detailed M&A process.Then this article analyzes and compares the business performance of Eternal Asia before and after the merger from three aspects: financial performance,market performance and economic value added.The analysis found that: First,apart from the profitability and profit quality of Eternal Asia,all other financial indicators were relatively stable or improved after the merger,and the decline in profitability was caused by Eternal Asia's business integration.Second,after the the news of M&A announcement,market investor confidence was improved,and the company 's cumulative excess return on stocks showed an upward trend in the short term.Third,after the state-owned assets entered into theshares,the economic value added of Eternal Asia was changed from negative to positive,bringing positive effects to shareholders and increasing Shareholder wealth.Therefore,it is concluded that buying shell with state-owned capital is beneficial to the current company or the market.In the current downward economic situation,state-owned assets entering some potential leading enterprises or local SMEs can not only help enterprises get out of their predicament,but also help local governments or acquirers better implement relevant policies.In addition,in order to play the role of state-owned assets more effectively in buying shells,the end of the article suggests that the acquired company actively cooperate with the restructuring and adjustment.The acquirer must reasonably promote the reform according to the actual situation of the acquiree.The government and the state should give policy support,but still need to give the acquiree enough independence to better serve the market.