Motivation And Performance Research Based On The Carve-out Of CRCC And CRCCE

In December 2019,the China Securities Regulatory Commission issued the "Pilot Provisions for Listed Companies to carve out Subsidiaries to Be Listed in Chinese Mainland",which allows certain companies to spin off subsidiaries to be listed on domestic capital market.Since then,equity carve-out has become one of the hot topics in China’s domestic capital market.On December 16,2015,China Railway Construction Corporation Limited,implement a carve-out to list its subsidiary,which name is China Railway Construction High-tech Equipment Co.Ltd.,on the Stock Exchange of Hong Kong.After the Securities Regulatory Commission approved the domestic carve-out in December 2019,China Railway Construction announced that it would make an equity carve-out of China Railway Construction Heavy Industry Group Co.,Ltd.to make it listed on the SSE STAR Market.As the first successful case of the A+H-share listed state-owned enterprise spin-off subsidiary to the Hong Kong Stock Exchange,China Railway Construction’s experience in carve-outs could be an important reference for companies which plan to choose equity carve-outs.Based on Asymmetric Information theory,principal-agent theory,refocusing theory,and financing strategy theory,the motivation and performance of CRCC’s carve-out will be analyzed in order to explore whether carve-out can meet company’s initial demands.By analyzing the abnormal return rate of the equity carve-outs,it is concluded that implementing equity carve-out is a good news for the parent company,but the positive effect is relatively short.By analyzing the financial indicators,economic value-added and non-financial indicators of both companies,it is found that the carve-out can relieve financing pressure,improve the governance structure of CRCCE and broaden overseas market,but equity carve-out has had little impact on the profitability and operating capacity of the two companies.What’s more,the economic value-added of CRCCE has also fallen sharply.Generally speaking,the carve-out has little impact on the long-term performance of both companies,and its effect did not meet expectations.Therefore,It is recommended that companies should carefully choose equity carve-outs,fully consider company’s own developing needs and characteristics before making decisions.For those who have decided to use carve-outs,they should flexibly change business strategies to achieve long-term development.It is hoped that this article can provide empirical reference for companies that plan to choose equity carve-outs,and help them make rational use of equity carve-outs to increase their value.