Research On The Motivation And Effects Of China Railway Construction Corporation’s Two Equity Carve-Outs

In 2000,after Tongrentang successfully split off its subsidiary,the equity carve-outs as a shrinking asset restructuring method attracted the attention of Chinese enterprises.In order to deal with the diversified management problems such as information lag,decision-making complexity and business decentralization,it is a good way for enterprises to simplify the information transmission path,strengthen the independence of decision-making and core of business by splitting and listing.At present,the domestic capital market has gradually loosened the policy restrictions on the equity carve-outs.In January 2022,in order to improve the basic system of the capital market,the China Securities Regulatory Commission revised and integrated the regulations about the equity carve-outs to form a new rules.After the implementation of the new regulations,the equity carve-outs have become an important asset reorganization method for enterprises to choose from.After that,whether or not to carry out equity carve-outs and how to carry out equity carve-outs for enterprises plagued by diversification have become an important strategic decision for enterprise to consider.This paper adopts the case study method,takes China Railway Construction Corporation(CRCC)as the research object and conducts the case study from three aspects:motivation,listing path and performance.This paper firstly analyzes the motivation from the background of parent and subsidiary companies.Secondly,it compares the pros and cons of the listing paths and obtains the reasons why CRCC chose different paths for two equity carve-outs.Finally,it analyzes equity carve-outs effect by exploring the development prospects of the parent and subsidiary companies.This paper uses the event study method and financial indicator and non-financial indicator analysis to compare the impact on parent and subsidiary companies.The study found that the market reacted more positively to CRCC’s first equity carve-outs than the second one.The long-term performance response of the subsidiary is more positive than that of the parent.In terms of non-financial performance,subsidiaries is more conducive to increasing their own R&D investment after listing.The paper summarizes the research conclusions,and refines the experience of equity carve-outs.In terms of selection of subsidiaries,the subsidiaries selected by CRCC are both technologically innovative companies,and their main business has strong independence.In terms of path selection,the enterprise needs to consider the operation status of the subsidiary and the purpose of listing.In terms of timing,the first equity carve-outs of CRCC is in the reform period of mixed ownership.At this time,the company can seize the reform opportunity and improve the company’s management efficiency through reform.The second is in the context of a rare global outbreak.At this time,equity carve-outs can diversify operating risks and improve overall financing situation of the group under the epidemic.Therefore,when making a decision,an enterprise must clarify the purpose of equity carve-outs,seize the opportunity and choose the right time,so as to achieve the expected effect of equity carve-outs.