Research On The Performance Of Pharmaceutical Companies’ Equity Carve-outs

In the domestic capital market,the equity carve-out is not very common due to the strict limitation of supervision.However,with the related policies introduced by the CSRC,more and more listed companies take this contractionary way to carry out reorganization of assets in our country.Equity carve-out is especially favored by pharmaceutical listed companies with diversified business and facing rapid industrial development and transformation.Equity carve-out becomes one of the important approaches for them to effectively solve the financing problems commonly faced,and help them improve their management efficiency and innovation.CSPS is a large pharmaceutical company listed on the stock market,and spinning off CSPC Innovation Pharmaceutical Co.,Ltd and listing it on GEM is the second practice for CSPS on equity carve-out,which is significant for the pharmaceutical industry.Therefore,based on the analysis of the pharmaceutical industry and the current situation of its equity carve-outs,this paper chooses the case of CSPS as the research object to study the impact of the equity carve-out on performance.Based on the analysis of theoretical basis,system of equity carve-out and industry background,this paper makes an in-depth analysis of the motivation for CSPS to carry out the equity carve-out,and makes a comprehensive analysis of the changes in the market reaction,financial indicators,value creation and non-financial performance through the event study,the comparative study and the entropy weight method.This paper draws the following conclusions through the study mentioned above:(1)The equity carve-out has a positive short-term effect on the share price of CSPS,and also has a positive effect on its long-term market performance to a certain degree;(2)The positive effect of equity carve-out on the subsidiary’s comprehensive financial index performance is limited and hardly sustainable,and it does not significantly improve its value creation,which requires further verification in a longer period of time;(3)After the equity carve-out,the comprehensive financial index and value creation performance of CSPS are good as a whole,but it is worth noting that its performance will be also affected by other factors;(4)The equity carve-out effectively provides financing channels for the subsidiary,which also helps it extend its industrial chain and increase its investment in product innovation,but does not have significant positive effects on its governance,including management incentives and independence;(5)The equity carve-out also frees CSPS from its financial constraints and effectively promotes its research and growth in the field of innovative drugs.In general,the equity carve-out has limited positive effect on CSPS and its subsidiary.Finally,this paper puts forward some suggestions for listed pharmaceutical companies and regulators based on the conclusions,such as the parent company should make long-term strategic planning before the equity carve-out,the regulator should strengthen the supervise,and the subsidiary should improve the efficiency of capital utilization and strengthen the incentive of management after the equity carveout.This paper has certain theoretical and practical significance by studying the case of equity carve-out.