A Study On The Influencing Factors And Premium Of The Privatization Of Chinese Overseas Listed Companies

This paper aims at discovering the privatization motivation of concept stocks and the considerations taken before making an acquisition premium decision.It is based on the background of Chinese enterprises seeking opportunities to be listed on the foreign capital market since 1990 s and several waves of privatization starting from 2010.Mainstream theories including principal-agent theory,the tax shield value theory,the transaction cost theory,the information asymmetry theory,the value undervaluation theory,and the asset liquidity theory are discussed in this paper.Firstly,I select 117 concept stocks companies that have advanced a proposal for privatization in the US or Hong Kong capital market as sample of testing.The control group is established based on a certain criteria and with a ratio of 1:1.Then,I adopt LOGIT regression model to find the influencing factors of privazation.Secondly,since the stock ownership are relatively centralized in the Chinese stock market,I screen out the samples with the privazation sponsor with a shareholding ratio of more than 20%.The empirical results show that the probability of privatization are relatively low for those companies with small agency cost,undervalued,strong profitability and small tax burden.The reason is that large shareholders who have more chances to transfer assets or interests form the company tend to maintain the company’s listing status.During the privatization process,the offering price put forward by blockholders reflect the benefit gamble between the buyer and other shareholders.Firstly,the blockholders are more willing to pay a higher premium to alleviate agency problem.Secondly,based on the information asymmetry theory and value undervaluation theory,blockholders of listed companies are more likely to pay a higher premium to buy back the stock if the stock is undervalued or the stock worth more in another capital market.There’s arbitrage opportunity when companies seek the right time to go on market again.Furthermore,higher purchasing price brings positive signal effect.Lastly,blockholders owned large stake or could sponsor more shareholders to initiate privatization togather will be conducive to reducing the difficulty of acquisition and thus being able to set a lower purchase premium.The innovation work is mainly embodied in taking Chinese enterprises’ share concentration ratio into consideration.By focusing on the privatization motivation of blockholders specifically and the influencing factors of price premium,it distinct itself from other papers.Hopefully,it can provide insights into the exploration of Chinese concept shares.