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Human Capital incentive management buyouts of listed companies

Author: FanMin¡¡LiuFeng From: www.yourpaper.net Posted: 2009-04-02 17:06:25 Read:
[Abstract] The author believes that the management buyout maximize contributed to the unity of corporate control rights and residual claims, human capital has played the role of property rights incentive. I will management buyout incentive problems of the human capital of the listed company, in order for policymakers.

Introduction

Management buy-outs (ie, MBO, Management Buy-outs) is the management of the target company by borrowing financing the acquisition of the company's shares, thereby changing the ownership structure of the company, control over the structure and asset structure, to reorganize the company, the benefits expected from a takeover. If the company's management decided to make the company or a subsidiary of the public company into a private company, the management buy-out occurs. Since the 1990s, as a solution to the enterprise, especially in the corporate governance structure of state-owned enterprises an important means of management buyouts in China has been widely implemented. In June 1999, the private high-tech enterprises of the famous Stone adoption of a management buyout to complete the transformation of property rights issues over the years plagued the development of enterprises. Guangdong, Shenzhen Fangda, Wuchang fish, and a series of management buyouts, after quietly rising. Fearing large-scale implementation of MBO may lead to a big risk, in April 2003, the Ministry of Finance said in reply to the former State Economic and Trade Department of Enterprise "on issues related to the reform of state-owned enterprises", the relevant laws and regulations are not perfect, suspended accepting and approving listed and unlisted companies, management buyouts, to be the relevant departments to propose relevant measures before making a decision. In December 2003, the State Council issued the SASAC "views on the specification of the state-owned enterprise reform," clearly put forward the transfer of property rights in the process of restructuring of state-owned enterprises will enter the Assets and Equity Exchange. January 9, 2004 promulgated the "Interim Measures for the transfer of state-owned property management, first from the program specification of the whole process of the transfer of state property. Subsequently, a number of large and medium-sized state-owned enterprises, listed companies such as TCL, Anhui Water Resources, Conch Group, Wuhan Organic MBO trends once again become the focus of public attention.
To this end, in the academic research on the issue of management buyouts have continued to increase. Kieschnik (1989) MBO many theories to explain a general summary, pointed out the MBO (LBO) theory to explain the presence of transaction costs, taxes, takeover defense, free cash flow, control, managerial compensation defects deprive creditors, financial leverage non-fully utilized, risk arbitrage nine hypotheses. Wright et al (2001) distinguishes four types of MBO: efficiency, acquisition, renewable acquisition, entrepreneurs acquisitions and failure acquisition. In China, Fang Hua (2002) through the Yutong Bus and Guangdong, the U.S. study of two listed companies, MBO in China is still in its infancy, and its development in the system are needed to further standardize the development of relevant policies and regulations to prevent this The process of state-owned assets and the loss of collective assets. Li Kang, Yang Xiong et al (2003) both from the theoretical and empirical depth study of the influence of MBO non-tradable shareholders and the interests of the holders of tradable shares, found that MBO listed companies there is a strong dividend impulse has been completed and is being implemented. Dual shareholding structure, management shareholders interests and dividends was a monotonically increasing relationship, the higher the bonus, the greater the management of the interests of shareholders. Ba (2003), and many other aspects of the current market environment, MBO in China there are five specific risk factors are administrative risk, pricing risk, financing and dividend risk, operational risk and acquisition of the main legitimacy. Li Yao (2004) concluded that the analysis of the management buyout of Guangdong, the U.S. brought new incentives in the management of post-acquisition of Chinese enterprises is a clear property rights, equity incentive mechanism.

Second, strengthening Corporation Human Capital Property Right Motivation: MBO

(A) management buyout reduce the principal-agent costs, motivate managers strive to solve the problem of enterprise "proxy"
Implementation of MBO, strengthen supervision and incentive mechanisms can be an effective solution to the problem of agency costs. Fama and Jensen pointed out that the agency cost problem in the lack of effective oversight mechanisms and the lack of effective incentive structures for managers of enterprises. On the one hand, MBO is the concentration of ownership of the process, but also managers to increase the stake. Ownership concentration is conducive to the strengthening of the supervision mechanism, large shareholders than small shareholders more willing and more able to contribute in strengthening the supervision of the company, is conducive to the interaction between the internal. Especially institutional shareholders involved, will make supervision more effective. On the other hand, the implementation of MBO, the owners and operators into one, managers have a stake in the company, corporate performance and managerial compensation directly linked to, can contribute to their commitment to innovation, enterprise potential, long-term benefits reform. MBO managers of the enterprise at the same time become a business owner, so as to stimulate the enthusiasm and potential of managers. In addition, management often through the intermediary financing institutions to provide financial leverage MBO, with less of its own funds and a lot of external funding to achieve the company's acquisition of such a financing structure to increase pressure on the company's debt, to a certain extent on management to try to reduce agency costs.
Implementation of MBO for state-owned enterprises to provide effective supervision and restraint mechanisms. China's state-owned enterprises reform process serious internal control problems, such as over-the-job consumption, information disclosure is not standardized, nothing but good news, not make the interpretation of the major business activities. Implementation of MBO, (1) the management control of listed companies through acquisitions into one entrepreneur Weiying definition of managers and capitalists, the original absolute separation of operating and ownership of some or all combined. Managers in the separation of ownership and optimal choice of non-optimal choice of combination of two rights, the elimination of the separation of ownership and shareholders and management objectives, from the fundamental solution to the shareholders - such as the management commissioned - agent problem. (2) MBO separation of ownership in case of external constraints into internal constraints and mutual restraint, members of the management in the long-term cooperation to form their own team's reputation, the reputation is not destroyed due to short-term interests among members lazy will be reduced. (3) MBO management to the accumulation of wealth and reputation in the industry all bet on the success of the company's operating business failure of listed companies means that the management of both life and wealth, loss of wealth, but also the years of reputation ruined Once, when management will strengthen the sense of self-restraint. (4) Since the MBO of the state-owned shareholders is no longer a controlling shareholder, which has weakened the state-owned color management will be difficult to expect the left lateral mobility and the enterprise business failure. In this case, the management of the operating cost of failure is much larger than the original, which will encourage them to work harder.
(B) management buyout led to the unified control of the enterprise and Claim for Firm
Connotation of income distribution from the qualitative analysis of enterprises to participate in the distribution of income in accordance with the allocation basis, the main rational allocation of corporate earnings in the enterprise income distribution between participants, it reflects certain economic relations. Enterprise Income Distribution in financial management has an important position.
Corporate financial goals depends on the support of the income distribution. To achieve the goal of maximizing corporate value, you must want to make use of the Enterprise Income Distribution of this medium, to enable enterprises to gain reasonable allocation can be achieved in each participant.
2. Continuing operations and corporate income distribution is "devotion". Every funding cycle to generate revenue has quite a lot of complex interest, interest rational treatment of the continuous cycle of enterprise funds and to continue as a going concern is essential. Interest handled properly, not only affect the re-financing of the enterprise; and can affect the size of the stock of corporate assets.
The rational allocation of enterprises can help enterprises to establish a good financial image, and good corporate financial image of the set is an important guarantee for the enterprise to obtain funds to expand production and increase efficiency. Occupies a very important position as an allocation of one of the elements of human capital in the interests of the allocation mechanism. It can be said, Human Capital Elements reasonable solutions across the enterprise often determines the distribution of benefits is reasonable and effective. The truth is that the Human Capital characteristics. The one hand, the natural human assets attributable to the individual; On the other hand, the property rights of human capital, once damaged, its assets can immediately devaluation or gone. Human Capital Property Rights private decisions can not impose uniform rules in order to implement thorough oversight. Therefore, relying solely on supervision can not completely solve the efforts of human capital, and the residual claim arrangements can be used to solve the problem of self-monitoring.
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