The Research On The Complete And Incomplete Divestiture Conditioans Of Corporate Divisions

Along with the emergence of M&A wave, corporate divestiture emerges. Looking at the several M&A wave in West, it seems as if divestiture were the medicine after blind mergers. For example, the proportion of divestiture events in corporate restructuring events kept high in American corporate after the third M&A wave. Joint-stock reform of state-owned corporate in1993opened the prelude to divestiture of China’s corporate. Subsequently divestiture played a more and more important role in corporate reconstruction. However, owing to the ingrained thinking of being bigger and stronger, divestiture activities, especially the divestiture of organization structure, had not been given sufficient attention in theory and practice compared with other expansionary constructive activities, which is more obvious in China. Besides, whether the divestiture object is chosen reasonably is the pre-condition to make the divestiture be successful, so it is more important to research the divestiture condition of the object before the actual divestiture happen. However, there are a few literatures concerning this problem.In order to response to the above phenomenon, this thesis hopes to research the divestiture conditions of corporate divisions, one kind of the organization structure’s divestiture, and enrich the theory of corporate divestiture. Based on the analysis of development status of corporate divestiture and the definition of the related concepts, such as corporate division, division divestiture and so on, the thesis reviews the domestic and international researches on corporate divestiture, and discusses the research necessity of the core problems and the feasibility of the research methods. According to the basic model of corporate division and efficiency criteria put forward by Mr. Yin Yusheng in2009, introducing operating profit criteria, supposing the product demand of the downstream is linear and the divestiture decision affects the output of corporate, and using the Cournot competence model, this thesis researches the conditions of complete divestiture of one and more input or output divisions, analyzes the effect of competence of the downstream market on the conditions of divestiture, and investigates the conditions of a input or output division under incomplete divestiture. Based on the above analysis and reputation mechanism, the thesis investigates further the possible conditions of division divestiture when the managers focus on their income or utility, that is, how manager’s personal behaviors affect the division divestiture.Through the research, the following conclusion can be available. Firstly, no matter what the premise condition is, compared with that under the operating profit criterion, the divestiture condition under efficiency criterion is easier to be satisfied. Secondly, the divestiture condition of the single input or output division is related to the market scale of the downtown products, the market price of the raw material needed to product the division’s resource, and the total control cost of the corporate, but that of the input division is decided by the market price of the division’s resource, which that of the output division is decided by the market scale of the corporate product. For multiple input or output divisions, the divestiture condition of each division is affected each other. Owing to involve in two products’competence, the effect of the product’s market competence on the divesture condition of the output division is more complex than that of the input division. Although the incomplete divestiture is only an intermediate state, under certain condition, this state is the best choice for corporate. Last but not least, when considering the effect of the manager’s personal actions on the divestiture action, the supervision function of reputation mechanism on managers under profit criterion is significantly larger than that under utility criterion.