Research On The Value Creation Path And Effect Of Kingsoft’s Equity Carve-out

With the continuous development process of enterprises,more and more types of business and the expansion of the scale of enterprises,diversification has gradually become the choice of many large enterprises.In the short term,it is beneficial to the development of enterprises,but in the long term,diversification will disperse the company’s operational focus,resulting in a series of problems such as uneven allocation of resources and reduced management efficiency.As a new way of reorganizing resources,a divestment can optimize the allocation of resources and enhance the level of specialization.Research related to divestment and listing started earlier in foreign countries and has formed a more complete theoretical and application basis.In contrast,China has only formally introduced the regulations related to the domestic spin-off of enterprises in 2019,and has not yet attracted the attention of many enterprises.At present,there are not many enterprises with domestic equity carve-out in China,and there are few relevant theories and case studies,and insufficient understanding of the mechanism of value creation and the effects generated by equity carve-out,therefore,it is of good theoretical and practical significance to study the case of equity carve-out of enterprises in China.As a strong Internet service company with an early start in China,Kingsoft has formed a diversified business model after years of development,and there are obvious differences between the businesses.In order to achieve business centralization and specialization,Kingsoft has recently and frequently adopted equity carve-out to make its subsidiaries listed independently,indicating that spin-offs are one of the corporate strategies.This paper selects the spin-off of Kingsoft in 2019 as a case study,uses relevant theories to analyse the motivation and value creation path of the equity carve-out of Kingsoft in conjunction with the actual situation of the company and the development trend of the domestic market,and uses EVA analysis,factor analysis and event study method to verify the value creation effect of the equity carve-out of Kingsoft.After the study,the following conclusions were reached.Firstly,there are five reasons for the equity carve-out of Kingsoft.Namely,the need for the overall development strategy of subsidization,expanding the financing channels of the Group and its subsidiaries,enhancing the professional operation and brand awareness of the subsidiaries,achieving the correct market valuation of the parent company and subsidiaries,and further improving the governance structure of Kingsoft Office.Secondly,the value creation path acting on financing activities mainly includes the value creation path for financing activities containing broadening the financing channels of the subsidiaries and eliminating the degree of information asymmetry between the outside and the enterprise.The equity carve-out helps the parent and subsidiaries focus on their main business,achieve centralized operation and development.And at the same time,the equity carve-out would increase the capital investment in research,sales and management.Thirdly,the finding through factor analysis shows that the equity carve-out has significantly improved Kingsoft Office’s operation and optimized its financial level.The analysis by event study method shows that the equity carve-out has significantly stimulated Kingsoft Office’s short-term stock market performance and brought short-term share price.Through EVA method,it can be known that the economic added value of the company has significantly increased after equity carve-out,indicating that the Kingsoft Office’s comprehensive value and create wealth for shareholders can be enhanced by equity carve-out.