Research On Motivation And Performance Of Spin-off Under Registration System

It is a common capital operation method in European and American markets for listed companies to go public after splitting their subsidiaries.However,due to the imperfect market development,it was not until 2019,when the registration-based IPO system was implemented,that the introduction of detailed rules for carve-off started the rapid development of China’s carve-out.Since December 2021,more than 90 enterprises have released the carve-out plan,which is bound to bring great impact on the capital market.Therefore,in-depth research on carve-out has important theoretical and practical significance.The coming of IPO registration system and carve-out rules provides new opportunity for the development of China’s capital markets.The registration-based IPO system reduces the actual threshold for enterprises to go public and broadens the financing channels.The detailed rules for carve-out provide policy guidance and encouragement for domestic carve-out.The joint action provides policy opportunities for enterprises to quickly carve-out to the Science and Technology Innovation Board or GEM for financing.To study the effect of these policy changes,the paper selects the equity carve-out of Shanghai Electric Group(SSG)to do a case study.As operating in diversified businesses,SSG cannot ensure its subsidiary(Electric Wind Power,EWP)‘s money demand in researching and producing wind turbine generator system when the development of the industry is accelerated by the ‘double-carbon’ object of the government and the industry is becoming increasingly competitive.The new IPO registration system and carve-outs policies enable SSG to do an equity carve-out,let EWP become an independent company and IPO in the Science and Technology Innovation Board.Our study shows that,the carve-out eliminates the diversification discount and realizes the high valuation of EWP,and therefore alleviates the financing constraints;As carve-out promotes the management incentive of subsidiary and the efficiency of decision-making,the operating state and R&D output both improves significantly as well as the competitive strength of EWP,and thus finally leads to a better business performance and an increase of shareholder wealth;The carve-out lets the subsidiary operate independently and thus unaffected in the risk events of SSG,although the stock price gets short-term pressure.In sum,our case study proves that,the new IPO registration system and carve-out rules untie the institutional constraints,so that diversified companies can activate the development of subsidiaries by carve-outs,and thus enhance the efficiency of capital allocation.Based on the results of the case study,this paper puts forward the following suggestions: first,when the diversified companies encountered the business difficulties caused by the unreasonable allocation of resources,it is rational to carve-out.Of course,the subsidiary companies should improve the utilization efficiency of funds and enhance core competitiveness;Second,the domestic carve-out listing model is single,the policy flexibility can be further improved,in order to release the potential of enterprise capital optimization,promote the further effective allocation of capital market resources;Third,investors need to be more careful about the screening of carveout listed companies,because the quality of the business is the key factor that determines the long-term development of the company.