Research On The Motivation And Economic Consequences Of Asset Divestiture In Medical Enterprises

In the process of continuous economic development,many enterprises have achieved rapid development through mergers and acquisitions.Of course,mergers and acquisitions are an effective means for enterprises to develop by leaps and bounds,but in the wave of mergers and acquisitions,there are many enterprises that "follow the flow",and carry out "outlet-style" mergers and acquisitions in the period of good macro environment and rapid development of the industry,resulting in the consequences of scattered main business,weak main business,tight resources and low efficiency,and even difficult to "digest" huge assets,losing losses or even fading out of the market in the drag of non-performing assets.China’s economy has entered a stage of transition from high-speed development to high-quality development.High-quality development is the primary task of comprehensively building socialist modernization.Among them,as an important material foundation of socialism with Chinese characteristics,whether the state-owned economy can take substantial steps in high-quality development has an important impact on China’s realization of high-quality development.The reform of state-owned enterprises also requires state-owned enterprises to advance and retreat in an orderly manner,focus on their main business,and improve the quality of development.In the process of transformation and upgrading,quality and efficiency,asset divestiture,as a shrinking capital strategy,has become one of the effective ways for enterprises to sell assets with poor operation,weak profitability and not in line with the future development direction,and has been more and more widely used in the capital market.However,compared with mergers and acquisitions,the current academic research on asset divestiture events does not match the rapid pace of development in practice,most of them are statistical research on the motivation and performance of asset divestiture events,and research that goes deep into a specific industry or focuses on a certain type of asset divestiture event is still very rare,and there is still a lack of clear conclusions on which dimensions of asset divestiture affect the financial of enterprises and how they affect enterprises.Based on literature research and case study method,this paper first sorts out the relevant research on the motivation,mode and effect of asset divestiture by domestic and foreign scholars,clarifies the scope of the concept of "asset divestiture" involved in this case,and analyzes its mechanism.At the same time,the overall situation of asset divestiture of listed companies in China in recent years is statistically analyzed.On this basis,taking Xinhua Medical,a state-owned medical device enterprise,as the case study object,the specific transaction details of the divestiture event between 2017 and 2021,the financial status of the divestiture target,etc.,were sorted out,the development and M&A history of Xinhua Medical was traced,the relevant company announcements were sorted out,and the combination of quantitative and qualitative methods was used to explore the deep reasons for Xinhua Medical’s asset divestiture.From the two dimensions of market performance and financial performance,the actual impact of divestiture on the economic effect of enterprises is analyzed and studied.In terms of market performance,the event research method is used to calculate the cumulative excess return of the company’s shares during the window period before and after the divestment;In terms of financial performance,the direct impact of divestitures on net profit,financial indicators and cash flow is evaluated.The study found that the gap in expectations caused by external industry changes and internal investment decisions was the main reason for Xinhua Medical’s divestiture decision,and through the sale of assets with bleak development prospects and inconsistent with the future development direction,Xinhua Medical’s financial position improved,which was reflected in improved profitability,reduced debt service risk and corporate free cash flow from negative to positive.At the same time,the investment income from the sale of assets significantly increased the net profit of the current period.In terms of market performance,if the assets divested have bleak development prospects,the market response will be more positive,which can increase shareholder wealth in the short term.Therefore,this paper concludes that divesting non-performing assets can increase shareholder wealth in the short term;Divestitures can improve the financial health of a business;At the same time,we should also be wary of divestitures becoming a means for enterprises to manage their earnings.Based on the conclusion,this article suggests that enterprises should make divestiture decisions based on strategy,and investors should pay more attention to net profit after deducting non-recurring profits and losses.This study is helpful to provide a certain reference for companies planning to adopt divestiture methods,rationally understand the effect of asset divestiture,and hope to provide an empirical reference for industry supervision and investor opportunity identification of asset divestiture transactions in China.