A Study On The Performance Of *ST East Crystal Electronic Asset Divestiture

As one of the significant aspects of corporate tightening development strategy,asset divestiture plays a key role in the optimization of market resource allocation,revitalizing existing assets and the improvement of industrial structure.In a short period of 44 days from September 7 to October 20,2018,the CSRC issued seven policies for asset restructure.A series of policies,ranging from the management policy of asset restructure and separated review of asset restructure to the shortened interval of an enterprise being rejected of asset restructure,reflect regulatory authorities' great support in the market asset reorganization.The study on the effect of the implementation of asset divestiture,a principle way of asset restructure,is of much value in current time.This paper,taking *ST Zhejiang East Crystal Electronic assets divestiture as an example,analyzes the motivation,timing,characteristics and performance of *ST East Crystal Electronic assets divestiture in a systematic way with case study method.On the one hand,Adopting event study method,this article analyzes the market performance of *ST East Crystal Electronic assets divestiture by calculating its excess return rate and cumulative excess return rate,which shows that this divestiture has lowered the shareholders' earnings,instead of increasing the share price of *ST East Crystal Electronic,indicating that investors do not have optimistic expectations for the asset divestiture of enterprises under the *ST predicament.On the other hand,with the consideration of the change in the average value of electrics industry and financial performance of *ST East Crystal before and after the divestiture,this article comprehensively analyses the impact of asset divestiture on the financial performance of *ST East Crystal with the financial indicator method.Through that analysis,it found that this divestiture has significantly improved the solvency and operational capability of *ST East Crystal Electronic in the short term,and has turned its losses into profits,avoiding the fortune of being forced to withdraw from the market.However,asset divestiture has not exert any obvious impact on the long-term performance of *ST East Crystal Electronic.At the same time,with a comparison of corporates in the same industry,it has been found that the performance of *ST East Crystal Electronic is worse than that ofaverage industry in terms of profitability,operational capacity,and growth ability.Although the public qualification of *ST East Crystal Electronic has been retained,it still needs to improve its competitiveness.In addition,this paper combines the characteristics of the enterprise to calculate the added economic value of *ST East Crystal before and after the divestiture,in order to evaluate the value creation ability of enterprises.Through analysis,it is found that assets divestiture has indeed improved the added economic value of *ST East Crystal Electronic,but the economic value added of the enterprise is still a negative number.Enterprises should improve its competitiveness of its core products,induce production costs and promote management efficiency by optimizing its management ability,so as to make that enterprise get out of the predicament and create more wealth for shareholders.Finally,by summarizing the cases mentioned above,this paper presents a reference to other companies in the same field in the implementation of asset divestiture.First,corporates should understand assets divestiture correctly and grasp appropriate time of asset divestiture.Secondly,they should attach great importance to the divestiture of core assets,and clarify the competitive advantage of the company.Thirdly,it is of great importance for enterprises to integrate resource after asset divestiture.