Study On The Motivation And Value Creation Effect Of The Equity Carve-out

Equity carve-out is an important way for diversified companies to ease financial restraint,improve management efficiency and realize the value re-creation goal.In order to avoid creating “shell resources” and protect shareholders' rights and interests,the development of equity carveout in China has not gone as planned.However,with more and more listed companies implementing diversified development strategies,the demand of listed companies to improve the efficiency of asset restructure through equity carve-out is growing.On December 13,2019,China Securities Regulatory Commission released the provision on listing of subsidiaries of the listed companies,which introduced seven requirements of equity carve-out.The new provision represents that the domestic equity carve-out channel has been formally opened.Under this situation,it is of great significance to study how listed companies achieve value re-creation through equity carve-out.CSPC has spun off its subsidiaries CSPC JFR and CSPC IPC to arrive at China's different capital market systems,NEEQ and GEM respectively.And then CSPS terminated the listing of CSPC JFR in NEEQ,which provides a good perspective for the research on the value creation effect of equity carve-out.Firstly,this paper analyzes the motivations of the two equity carve-outs of CSPC.The study finds out that the motivations of CSPC two equity carve-out are different.On the one hand,the CSPC listed CSPC JFR on NEEQ in order to improve its financial ability and enhance its competition.On the other hand,the CSPC listed CSPC IPC on GEM in order to achieve the group's strategy,satisfy its investment demand and maximize the group' s value.Secondly,in terms of the path selection,it is based on the consideration of the listing requirements of different capital markets,the difference of the financial environment between the domestic and foreign capital market and the development of the subsidiaries.Finally,based on the information asymmetry hypothesis and the benefit-separation hypothesis,this paper analyzes the value creation effect of the two equity carve-outs from short-term market value,financial effect,governance effect and operational effect.It finds out that the equity carve-out of CSPC IPC creates more value for the group than CSPC JFR due to the influence of the asset scale,the capital market that the subsidiaries arrive at and the industrial synergy effect with the parent company.Based on the analysis above,it finds out that the main reasons for the termination of listing of the CSPC JFR are the lack of strategic planning in listing decision,mismatch between the listing costs and financial chances and the weakened independence of subsidiary by increased related transactions.Besides,this paper also points out the problems existing in the process of the equity carve-out of CSPC IPC.Finally,this paper puts forward some suggestions on the problems emerging in CSPC's two equity carve-outs,which provides a reference for listed companies to improve the efficiency of asset restructure through equity carve-out.