Research On The Causes And Economic Consequences Of The Equity Carve-Out Of CRCC HIGH-TECH EQUIPMENT CORPORATION From CHINA RAILWAY CONSTRUCTION CORPORATION

The system of equity carve-outs in China is not perfect,the supervision is not clear,and there is no "fertile land" for enterprises to carve-outs freely.Therefore,most companies still choose to carve-out and list overseas.With the establishment of the science and technology innovation board in 2019,and the newly released "Several Rules on the Pilot Listing of Listed Companies to Spin-off Subsidiaries in China"(hereinafter referred to as "Several Rules")issued by the China Securities Regulatory Commission,the equity carve-outs has become a hot social issue.In 2015,CRCC successfully spun off its large road maintenance machinery subsidiary,CRCCE,and listed it on the Hong Kong Stock Exchange,it’s the first successful equity carveout of a large state-owned enterprise in China.However,according to the study on the performance of CRCCE,it was found that two years after the equity carve-out,the results of the CRCCE has been less than satisfactory.But CRCC was still active in making the equity carve-out after the establishment of the Science and Technology Innovation Board in 2019 in such a case.It announced its plan to spin-off its subsidiary,CRCCE,soon after the release of the Provisions,and released the revised draft of the plan in April the following year,becoming the first A-share enterprise to disclose the plan of equity carve-out on the Science and Innovation Board.It can be seen that the reasons and consequences of the equity carve-out of large enterprises are worth studying.Firstly,this paper summarizes the definition,causes and economic effects of equity carveout according to the relevant research of domestic and foreign scholars.Secondly,this paper introduces the basic situation of the parent and subsidiary companies,while elaborating the implementation of the equity carve-out process.Thirdly,this paper starts from the causes of equity carve-out of the enterprise,studies the short-term market reaction and performance after the equity carve-out,and summarizes a series of influences of this economic behavior on the enterprise.Finally,it is concluded that the causes for CRCC to split off and list its CRCCE is to promote the upgrading of company capital structure and the rationalization of the company valuation,and then broaden the financing channels of the company,enhance the international visibility of the enterprise,enhance the professional operation ability and optimize the level of enterprise management.According to the research on the economic consequences of the company,on the basis of the short-term market reaction of the enterprise,it is the same with the conclusion of most scholars from home and abroad that equity carve-out can bring positive impact to a certain extent.On the basis of the financial performance view,the equity carveout for CRCC is not very obvious,the influence of some changes of production,is not entirely from the carve-out the event,and for CRCCE,carve-out would have only a modest effect on its solvency,to improve operation ability,profitability and development ability also did not play a positive role,in terms of non-financial research,the equity carve-out also brought some positive impact,but some aspects of the impact did not last.By studying this case,we can know that this paper hopes to summarize the experience and lessons of CRCC’s equity carveout,and to provide inspiration for the large state-owned enterprises who want to make an equity carve-out in the future.