Study On The Economic Consequences Of Corporate Spin-offs In The Background Of "A To A" Spin-offs

As a special form of asset restructuring,divestment has been widely used in developed regions overseas since the 1990 s.In 2019,the pace of capital market reform accelerated,and the "Several Provisions on the Pilot Program of Listed Companies’ Spin-off of Subsidiaries for Domestic Listing" was promulgated in the same year,which clarified the "A to A" listing path and related operations."This provided a new way of development for many large enterprises in China that had fallen into the trap of diversification.Since then,China’s capital market has witnessed a wave of "A to A" listings.Against this background,the core question of this paper is "What is the impact of a spin-off on the business consequences of a company?"In this paper,the study will focus on the spin-off of ZJMI Environmental Energy CO.,LTD.(ZJMI)from Wuchan Zhongda Group CO.,LTD.(WCZD)and analyses the motivations behind the spin-off and determined whether there was any transfer of benefits,taking into account the specific circumstances of the parent and subsidiary before the spin-off and the market environment.It also examines the impact of the spin-off on the company’s operating results and its mechanisms from four perspectives: market effect,financing effect,operating effect and governance effect,based on the corresponding measures taken before and after the spin-off of the parent and subsidiary.The research ideas of this paper are as follows: firstly,based on a review of domestic and international research results,this paper summarizes the reasons behind and the impact of the spin-off and summarizes the relevant theoretical foundations;secondly,it introduces in detail the case of the spinoff of ZJMI from WCZD,including the basic information of the parent and subsidiary,the policy of the spin-off,the industry background and the specific process of the spin-off.Then,on the basis of relevant literature and theories,the motivation of the spin-off of the company in relation to the actual situation and environment in which the company is located is analyzed.Then,a determination is made as to the presence or absence of a conveyance.Finally,the paper analyses the economic consequences of the spin-off from four effects: market,financing,operation and governance,and explores in depth the mechanism behind the effect.Through an in-depth analysis of the case study,it can be found that the decision to spin off ZJMI was made by WCZD for reasons such as the need for core-ization,financing,management incentives and obtaining a reasonable valuation.The economic consequences of the divestment are mainly the following: firstly,although WCZD did not use the spin-off to transfer benefits,it did create certain conditions for the transfer of benefits;secondly,the divestment facilitates the revision of the value of the parent company;thirdly,the divestment directly raises a large amount of development capital for the subsidiary,improves its capital structure and expands its financing channels;fourthly,the divestment increases the independence of the subsidiary to a large extent,focuses on the development of its core business and achieves rapid and stable growth of its main business;fifthly,the spin-off has prompted the subsidiary to improve its governance structure on its own initiative in accordance with the listing requirements,and at the same time,it is required to make disclosures in accordance with the regulations for public companies and is under scrutiny by external bodies and the public,and therefore the subsidiary strengthens its internal and external governance mechanisms through the spin-off.This paper argues that the spin-off has positive implications for the company’s development and contributes significantly to the company’s financial performance and corporate worth,which is well in accordance with the motivation for the spin-off.