The Motivation Of The Disposal Of Subsidiaries In China

Since public company reorganization is an eternal topic in the domestic and overseas capital market, this paper takes the motivation of the disposal of subsidiary as research object, and empirically investigates the motivation of regional process of marketization and earnings management motivation. In this paper, the times of disposal of subsidiary and the value of disposal of subsidiary are explained variables, and the relationship between government and market quoted in the index of Chinese marketization report, capital market motivation, compensation contract, income smoothing, debt covenant are explaining variables, also asset-liability ratio, liquidity ratio, property net profit rate, total property cycling rate, operating cash flow per share, the alteration of chairman or CEO, control power owned by dominant stockholder are control variables.The main conclusions are as follows:(1) Regional process of marketization prompts the public company to dispose subsidiaries.(2) Under the capital market motivation, the capital market motivation tend to dispose subsidiaries in order to maintain the listing qualifications and meet the refinancing requirement. Under the compensation contract, there is a negative correlation between the disposal of subsidiary and the seller’s earning capacity. Under the income smoothing, there is a positive correlation between the disposal of subsidiary and the seller’s fluctuation of earning capacity. Under debt covenant, the higher debt levels is, the more disposal of subsidiary.(3) Compared with the lower market-oriented region, the positive relationship between the disposal of subsidiary and earning management will be weaken in the higher market-oriented region.