Research On The Motivation And Performance Of Shengyi Technology’s Spin-off Of Shengyi Electronics

With the increase in the diversification of the company’s operations,the parent company operating multiple businesses may be unable to afford the funds needed for the development of subsidiaries,and the advantages generated by the scale effect are decreasing day by day.Through spin-off and listing,large-scale enterprises have solved the problem of capital needs,and enabled the parent and subsidiary companies to focus on their respective core businesses and improve the competitiveness of the enterprise.Chinese capital market was relatively late in exploring spin-off listings.Until December 2019,the China Securities Regulatory Commission issued the "Several Provisions on the Pilot Program of Domestic Listing of Listed Companies Spin-off Subsidiaries",and the laws and regulations on spin-off and listing in the domestic capital market have been improved,many companies began to try to spin off and list in the domestic capital market.Shengyi Technology is the first company to complete a spin-off and listing in China,and it is also a company with strong competitiveness in the industry.Therefore,this paper chooses the case study of Shengyi Technology’s spin-off of Shengyi Electronics to provide reference for companies in the industry that plan to spin off and list in China.This paper first sorts out the relevant literature on the motivation and performance of the spin-off and listing,and theoretically analyzes the motivation of the spin-off and listing from the perspective of information asymmetry theory,core strategy theory,financing demand theory,and management incentive theory;Secondly,it introduces the general situation of Shengyi Technology and Shengyi Electronics,and conducts SWOT analysis;thirdly,explores the motivation of Shengyi Technology’s spin-off of Shengyi Electronics,and analyzes the reasons why Shengyi Technology was able to successfully spin off Shengyi Electronics for listing;then,the financial performance and non-financial performance of Shengyi Technology and Shengyi Electronics are studied by using event study method,financial index analysis method and EVA value evaluation method.Finally,draw conclusions and provide suggestions for other companies in the industry that plan to spin off and list in China.The conclusion of this article is as follows: From the perspective of the motivation for the spin-off: Shengyi Technology spin-off Shengyi Electronics is mainly for three reasons: broadening financing channels,focusing on core business,and strengthening the effect of equity incentives.Judging from the performance of the spin-off: For the parent company Shengyi Technology,the spin-off and listing brought excess returns to the stock price of Shengyi Technology in the short term and helped Shengyi Technology improve its profitability.But in the long run,the positive impact of spin-off and listing on the financial performance of Shengyi Technology has gradually weakened.For the subsidiary Shengyi Electronics,first of all,the spin-off and listing helped it raise a large amount of funds,solved the problem of single financing channels,enabled it to have sufficient funds to invest in new projects,expanded the scale of the R&D team,and improved its R&D level of the enterprise.Secondly,Shengyi Electronics introduced new strategic investors after listing,and since the company’s shares can circulate freely after listing,its equity incentive plan also brought high returns to the management,effectively alleviating the principal-agent conflict.Thirdly,from the perspective of financial indicators,the spin-off and listing has improved Shengyi Electronics’ solvency and profitability,and enhanced its industry competitiveness,but it has limited improvement in its operational management capabilities.Finally,in the year of spin-off and listing,the EVA value of Shengyi Electronics dropped significantly,but in the following year,the trend improved.Shengyi Electronics needs to further improve the efficiency of the use of funds in the future.Through the analysis of the case,this article puts forward three suggestions:(1)pay attention to policy changes and choose the appropriate listing time;(2)select high-quality spin-off targets;(3)focus on post-split operation and management to achieve sustainable development.