عملکرد شرکت، اکتساب دارایی و روش کنترل انتقال حقوق: شواهدی از بازار چین

The transfer of controlling rights for a Chinese public company is either a free transfer or an agreed sale. We show that good-performing firms are more likely to be transferred to new owners for free while poor-performing firms are more likely to be sold via agreed sales. Furthermore, we find that demands for these poor-performing companies come from new owners who can subsequently engage in profitable asset acquisitions. In addition, firms that are transferred through agreed sales extract higher returns through subsequent asset acquisitions than firms that are tendered through free transfers.

The process of converting from a planned economy to a market economy has led China to allow more diversified ownerships and facilitate transfers of corporate controls to other non-State entities. In the past few years, we have witnessed an increasing number of corporate control changes in China. Nie and Tian (2001) report that between 1996 and 2002, there were over 590 cases of controlling rights transfers, and the trend continued to increase. The development of an off-exchange market to assist the sale of State shares or legal person shares to another entity in 1999 also contributed to the increasing number of controlling rights transfers. Green (2004) points out that the major reason for the State and local governments to tender shares is to withdraw from failing enterprises. Another reason is to restructure the State-owned Enterprises (SOEs) and improve their competitiveness in the market place. Transfer of controlling rights refers to a change in either the large block shareholder or the ultimate owner of a firm. Currently the two approaches of controlling rights transfer in the Chinese market are free transfer and agreed sale (a.k.a. cash transfer). In the case of free transfer, the controlling rights are transferred from one large shareholder to the other for free. This occurs most frequently when the State government is the ultimate owner of both the acquirer and the target, and it is therefore a zero-sum game after the restructuring. Although it is less frequent, the free transfer can also take place between two private firms, as long as they have the same ultimate owner. The agreed sale however is more likely to involve non-State companies where they gain control of a listed company through cash transactions1. Methods of controlling rights transfer in China differ greatly from those in the developed countries. Many extant theories that explain the incentives and methods of ownership transfer are not applicable to the Chinese market. Berger and Ofek (1996), Kang and Shivdasani (1997), and Denis and Kruse (2000) suggest that firms in the U.S. actively engage in restructuring activities after asset acquisitions, however they have not considered the impact of the newly-acquired assets on firm performance. Cui and Jing (2006) use the data from Chinese market between 1999 and 2001 and propose a logistic model to forecast the likelihood of controlling rights transfer; Zhi and Tong (2005) examine the relationship between independent directors and controlling rights transfer; Xu, Chen, and Xin (2005) show a general positive market reaction to controlling rights transfer. However, none of these studies examines the subsequent asset acquisitions post the transfer. One of the contributions of this paper is to consider the restructuring activities after controlling rights transfer in China. In addition, we are able to separate the contributions of newly-acquired assets and analyze their impact on firm performance. We empirically examine the motivations for different types of controlling rights transfer (CRT). We demonstrate that target firms in free transfers are often firms with good performance while target firms in agreed sales are often firms in dire conditions. Furthermore, we show that subsequent asset acquisitions by acquirers are highly correlated with the methods of controlling rights transfer. Specifically, poor-performing companies are often acquired by new owners who can subsequently undertake profitable asset acquisitions. This paper is structured as follows. After discussing the institutional background, Section 3 presents two hypotheses. Section 4 describes our sample and Section 5 presents our empirical tests and results. Finally, Section 6 offers the concluding remarks.

In this paper, we show that poor-performing firms in China are sold through the method of agreed sale, while high-quality firms are simply transferred for free. Agreed-sale firms are more likely to conduct subsequent asset acquisitions and the contributions of acquired assets are larger compared to those of the free-transfer firms. We also find that the contributions of subsequently acquired assets improve the performance for the agreed-sale firms, while they are immaterial for the performance changes of the firms transferring controlling rights for free. Our results suggest that, for the agreed-sale firms, subsequent asset acquisition is a key driver for the performance improvement and our findings are consistent with the conjecture that acquirers purchase poor-performing firms expecting to restructure corporate assets and to enhance firm performance. Our analyses clearly identify a source of value creation for acquirers and recognize the contributions of subsequent asset acquisitions to the overall performance of the firms after CRTs. Future studies may also examine changes in financial and investment policies after controlling rights transfers to better understand the dynamics of controlling rights changes on firm performance in China.