An Analysis Of The Motivation And Economic Consequences Of ZTE Equity Carve-out

In the 1990 s,the foreign countries saw a serious "disease of large enterprises" due to the merger and acquisition frenzy.In order to address this issue,spin-off began to gain favor as a contraction-type capital operation method.With the continuous development of China’s capital market,Chinese companies have grown bigger and stronger.To meet the needs of domestic companies for spin-off listing,the China Securities Regulatory Commission(CSRC)issued the "Rules on Spin-off Listing of Listed Companies(Trial)" in January 2022,providing guidance and regulation for domestic spin-off listing and ushering in the beginning of domestic spin-off listing on the A-share market.As a typical diversified company,ZTE Corporation adopted a relatively novel stripped spin-off and was listed early,providing three years or more of financial data for long-term performance research.Therefore,using the case of ZTE Corporation’s spin-off of ZTE Microelectronics Technology Co.,Ltd.can provide reference for domestic companies choosing the spin-off listing path,and provide new ideas for listed companies to adjust their business strategies,enriching China’s case studies of the long-term performance impact of spin-off listing.This thesis adopts case study method,literature review method,and indicator analysis method to conduct detailed analysis on the path selection,motives,and economic consequences of ZTE Corporation’s spin-off listing of ZTE Microelectronics Technology Co.,Ltd.,and study the reasons for performance changes.Firstly,the thesis uses literature review method to summarize the relevant theories of spin-off listing;secondly,case study method is used to explain the development status of ZTE Corporation and ZTE Microelectronics Technology Co.,Ltd.,and thirdly,the implementation path of ZTE Corporation’s spin-off listing is introduced;fourthly,the relevant theories of spin-off listing motives are used to conduct a comprehensive analysis of ZTE Corporation’s spin-off listing motives;finally,event study method,financial indicator analysis method,and non-financial performance analysis method are used to study the performance changes of ZTE Corporation and ZTE Microelectronics Technology Co.,Ltd.,and to analyze the reasons for the performance changes in depth,in order to derive relevant research conclusions and inspirations.Through the case analysis of ZTE Corporation’s spin-off listing of ZTE Microelectronics Technology Co.,Ltd.,this thesis concludes that the motives for the spin-off listing are to improve the financial status of the parent company,expand the financing channels of the subsidiary,enhance the market value of the company,meet the parent company’s consolidation strategy and motivate the subsidiary’s management.Subsequently,in the analysis of the economic consequences of spin-off listing on the parent and subsidiary companies,this thesis finds that spin-off listing can increase the market value of the parent and subsidiary companies in the short term.However,in terms of financial performance research,the impact of spin-off listing on the short-term performance of the parent company is more significant,with significant improvements in profitability,operating and debt-paying ability indicators,but the impact on its long-term performance is not significant.Unlike the parent company,spin-off listing has a significant positive impact on the short-term and long-term performance of the subsidiary company,with significant improvements in profitability,operating,debt-paying and growth ability indicators.In terms of non-financial performance indicators,the internal governance level,research and development innovation ability,customer structure and sales model of both the parent and subsidiary companies have been significantly improved.Then,this thesis further analyzes the reasons for the performance changes,including that spin-off listing conforms to the parent company’s consolidation strategy...