Research On The Pricing Problems Of Mbo In Chinese Sme

Since reform and opening-up, the reform of state-owned enterprises has been the theme of Chinese economic reform. China has successively made a series of reform on the state-owned enterprises from the outside to the inside, from wealth distribution to management mechanism. Nevertheless, the general guideline of these reforms is "power relinquishment and transfer" based on not touching the change of property right. In the21st century, modern property right system should be established to endow the manager with right of use, beneficial right, strict protection and right of management in order to improve the mechanism of state-owned capital’s entering some fields and its rational flow, which was especially put forward in the third session of the16th CPC Central Committee. Under this circumstance, MBO (management buy-outs) serving as a rapid and effective exit strategy for state-owned capital sprung up at the proper moment. MBO is beneficial to avoiding the loss, enlarging the scale and increasing the value of the state-owned assets. Of course, MBO can bring about many problems. Problems of MBO in small and medium enterprises (SMEs) are especially more, among which the most essential and the most serious is pricing elements. Therefore, the study on problems of MBO pricing in SMEs, the countermeasures for solving these problems, and the reasonable pricing on MBO in SMEs are greatly significant for the development of SMEs in China.First of all, previous researches in this writing are reviewed. Theories on SMEs, MBO and MBO pricing are clarified. Collecting a great deal of information and investigations have a better solution to the problems on MBO pricing in Chinese SMEs. The current situation of MBO pricing in Chinese SMEs was expounded, and seven issues exist in MBO pricing in Chinese SMEs are put forward. Then, relevant financial data on MBO in33SMEs has been collected. The transfer price per share was taken as a variable to explain. Nine financial indexes such as the earnings per share, the cash flow of operating activities per share and so on are taken as variables to explain. A mixed cross section model is established to carry on empirical analyses on the influencing factors of MBO pricing in Chinese SMEs.The results of the study show that the current basis for MBO pricing in Chinese SMEs is unreasonable. The static financial index of net assets value per share shouldn’t be taken as a standard for MBO pricing. However, financial index should be taken into account from the aspects of static state and dynamic state. The enterprise value should be the standard for pricing. In order to change the situation of purchase price and self-dealing controlled by insiders, public bidding mechanism should be executed, financial accounting accreditation should be carried out, special committee system should be established, equity dividends should be limited after MBO, intermediate agencies should be brought in to take part in MBO. Preferential policy should be clarified. Management historical contributions should be taken into account beyond the range of MBO. The controlling premium of MBO should be considered. The remedy afterwards system should be established on the basis of no embarrassing terms in order to solve the unfair purchase price found after MBO.