Research On The Motivation And Economic Consequences Of Greentown China Spin-off Greentown Management Listing

In order to achieve rapid development,some enterprises may adopt expansion and merger strategies,but this diversified business model is likely to be accompanied by negative synergies.Therefore,in order to reduce the negative synergy between businesses,the capital contraction method of spin-off has been favored by capitalists.The group first internal high-quality business assets restructuring,integration into a whole,and then spins off the business for independent listing.This can not only improve the attention of high-quality business in the capital market and obtain financing,but also conducive to the further development of business.As far as the real estate industry is concerned,it has also experienced blind expansion before,leading to a trend of oversupply.In the period of economic downturn,competition within the industry is more severe,and the golden age of the real estate industry has passed.The property and agent construction industry is in the blue ocean market,with its strong profitability and good prospects for development,attracting large housing enterprises to share a slice.In December 2019,China’s Securities Regulatory Commission issued the relevant pilot provisions on equity carve-out,relaxing the basic conditions of equity carve-out.Large real estate enterprises take this opportunity to spin off the group’s high-quality businesses for listing in Hong Kong.It remains to be explored why real estate enterprises choose to equity carve-out,whether equity carve-out can make enterprises achieve the expected economic consequences,and what are the causes of such economic consequences.Therefore,this thesis explores the motivation and economic consequences of the equity carve-out of Greentown Management,the "No.1 construction company" of Greentown China,as an example.Based on the above background,in the research process,this thesis uses the literature research method and case analysis method to analyze the case of Greentown China’s spin-off of Greentown Management and listing.First of all,starting from the research background and research significance,the literature research method is used to summarize the relevant literature on the motivation and economic consequences of spin-off and listing,so as to find the insufficiency of the existing research.Subsequently,the theories related to spin-off and listing are sorted out,which lays the theoretical foundation for the case analysis part in the following.The main reasons why companies choose to spin off and go public can be summarized as the following four points: to meet the financing needs of the parent and subsidiary companies,to develop the core business of the parent and subsidiary companies,to reduce the information asymmetry of the subsidiary companies,and to motivate the management to improve efficiency.Secondly,in the case analysis part,this thesis adopts the case analysis method.First,the development status of the agency construction industry,Greentown China and Greentown Management were briefly described,and then the reasons for the spin-off and listing of the company in the case were analyzed and summarized,and the whole process of spin-off and listing was clarified.The main reasons for delisting Greentown Management are as follows: the macro-control policy has tightened the financing environment of Greentown China;the rapid development of Greentown Management requires a large amount of funds;it meets the needs of parent and subsidiary companies to develop their own core businesses;and the reduction of information asymmetry enables Greentown Management to obtain better results.Reasonable valuation;and mobilize the enthusiasm of the management of subsidiaries and improve the operating efficiency of the enterprise.Finally,this thesis evaluates the economic consequences of spin-off and listing on Greentown China and Greentown Management from two aspects of market reaction and financial performance,combined with event study methods and company financial indicators.It was further found that the spin-off and listing brought positive market reactions to Greentown China and Greentown Management,and improved the overall financial performance of the company.The specific performance is that the profitability and growth ability of the parent company Greentown China has been improving,and the subsidiary Greentown Management,in addition to the operating ability,has seen various degrees of growth in other capabilities,of which the improvement in solvency is particularly obvious.The reason is that on the one hand,the agency construction industry has a good development space before the spin-off,so the advantages of the spin-off can be released;on the other hand,the spin-off and listing enables Greentown Management to have a public financing platform and obtain development funds to promote the business.Development,the parent and subsidiary companies can also focus more on the development of the main business.At the same time,the spin-off and listing has also brought attention to the company,which is conducive to the group’s accumulation of brand effects and improvement of the executive incentive system.After the above analysis,this thesis draws the following conclusions from the case study:First,meeting the financing needs and the long-term development of the group are the main driving forces of equity carve-outs.Second,Greentown China concentrated its resources on the development of its main business through equity carve-outs,thus enhancing its profitability and growth capacity.Third,Greentown Management has improved its financing ability and obtained more development funds through equity carve-outs,thus facilitating the improvement of financial performance.Fourth,this equity carve-outs alleviates the information asymmetry between investors and Greentown Management and brings positive market reaction for the group as a whole.However,equity carve-outs is not blind.For listed companies,the advantages and disadvantages of all parties should be weighed before equity carve-outs,and the equity carve-outs should be carried out according to the actual situation.After the equity carve-outs,we should pay attention to the rational allocation of resources and improve the utilization efficiency of assets.For market investors,we should not only pay attention to the short-term effect of enterprises but also pay attention to the long-term effect.This thesis analyzes the case of equity carve-outs of Greentown China and Greentown Management,hoping to expand existing research on full spin-off listing,and provide guidance for the same type of enterprises,or enterprises planning to spin-off listing.