The Research On Delisting Financial Indicators Of Our Main Board Listed Companies

Chinese securities market has developed for nearly three decades from the Shanghai and Shenzhen Stock Exchange established.As the basic market for enterprises accumulating capital funds,it plays an active role in optimizing the allocation of resources,decentralizing risk,financing and so on.But our securities market lacked of the perfect delisting system in the early construction of the delisting system,which was mainly due to the lack of the standards of the listed companies exitting the market,so the market lacked of the corresponding channel of survival of the fittest.In 1993,the "Company Law" was promulgated by the State.It was the first time that identified the delisting requirements of the listed companies from the legal level.However,the delisting standards were fuzzy and the enforceability was low.For example,there was not clear period provision for companies that sustained loss.In 2001,the China Securities Regulatory Commission issued "Implementation measures of the suspendation and the termination of the listed stocks of loss of listed companies"(SFC [2001] No.25),which more specifically provided the situations that a listed company quits from the market,that marked with our securities market delisting system implemented formally.In the early years of the implementation of the delisting mechanism,many companies can not escape the fate that being delisted from the market.Because they lack of the market experience in dealing with delisting regulations.So 43 listed companies were forced to withdraw from the market by the SFC in the first six years.But the number of companies which were quitted from market every year differed greatly with the number of loss companies in recent years.The delisting rate is less than 1%.From 2007 to 2012,the percent of the loss listed companies is 15% in the market.But none of them was delisted.Because a large number of poor companies staged "crows change the Phoenix" plot and continued to exist in the market through the ways of earning management such as asset restructuring and government subsidinaries.It resulted in many problems that inefficient market allocation of resources,speculative style prevails,the interests of investors can not be effectively protected and so on.In October 2014,the SFC issued "a number of opinions on the perfection and strict delisting of listed companies from the market"(Commission Order No.107),which regulated that implement the delisting requirements clearly and strictly.After nearly three decades of exploration and development,although our delisting system gradually improved and enriched,such as the profitability,ownership structure,capital requirements,the effect was very little.The main reasons were that the indicators set loose and were easy to be operated.The delisting mechanism of securities market was enforced loosely in reality that the number of listed companies which were delisted from the market were rare.We found that the net profit indicators were the most frequently violated after researching the ST listed companies in 2013.It ignored the approaches that companies manipulate profits to avoid to be delisted through non-recurring gains and losses when made the net profit as a major indicator of delisting.Many ST listed companies adjust the composition of net profit to achieve “the positive profit” through the related transaction,government subsidies,asset restructuring,etc.However,the positive profit is not due to the substantial improvement in business performance,but for the purpose of preservation.It can not improve and keep the company’s sustainable business and management in the long-term.It has short-sight effects which can obstruct the implementation of delisting mechanism in the securities market and distort the function that allocation of resources.As the basis of the securities market,listed companies’ profitability and business continuity will directly affect the investor’s investment income and investment confidence and determine the overall quality of listed companies.Financial indicators are the main tools to reflect the management ability of the company.Through the analysis of the financial indicators,the financial status of the listed companies can be judged scientifically.So stricttig delisting mechanism and increasing requirement of the listed companies really matter.On the one hand,more strict delisting financial indicators and the higher claim of operating income and net assets can enhance its actual competitiveness.On the other hand,increasing and enriching the constraints of listed companies can reflect its development potential and sustainability of profitability.The main business profit represents of the company’s operations,which is the main part of the profits of listed companies.Compared to net profit,the main business profit has some significant advantages: the first one is that the main business profit increases the difficult of manipulating the profit,because it has restricted requirements of profit and has small interference of manipulating;the second one is that the average of the main business profits can reflect the company’s ability of operating and developing;the third one is that the main business profit growth rate can reflect if the listed companies has long-term performance.The purpose of the delisting mechanism is to enhance the quality of the listed companies,improve the efficiency of the market investment and financing,and protect the legitimate rights and interests of the small and medium investors.The premise of strict implementation of delisting is to set up a strict delisting financial indicators.Increasing the financial indicators of listed companies and strictting the standards of delisting financial indicators can help regulate the operation of the market and enhance the efficiency of market resource allocation.