About MBO in china

   After reading Mr langxianping's book, i think i got something to write. Indeed a few years ago when i am still in campus,the chinese government decide to improve the state-own enterprise performance.

  First of all, let's discuss the ownership of the so-called state-own companies.In economics,i think the ownership is rather clear,that's the company belongs to the nation or every person in the country.So the ownership structure is rather obviously.So in my eyes , the ownership is vague or ambigurous is wrong.The poor performance of the companies is caused by the agent relationship.In fact,there double agent relationship exist in the company and its owners.one is the owner and its government institute and the government institute and the managers.To tell the truth,I think the only thing the government didn't see is the ownership stucture change do not do any good to the company performance and its owners.

    Two,Information imsymmetric and mortal issue.since the imsymmetric information and risk of mortal do exist in the real world.So the law become the only weapon to prevent the manager to act in his interest instead of its real owners.In china,I think many law are too abstract and hard to operate.The reason to this is that the so-called law expert do not know too much about every industry.So all they can do is to talk it in all.In fact,I think the things counts is how to excute the laws.

   Third:pricing.the price of company is decided by its net asset or net value.In fact,the manager can control the economic profit and the accouting profit easily.So in some sense,the manager can control the net value of the company.The only way to judge the price of company is put it in the capital market.The third party aduit institute like E&Y.KPMG,PWC I think after their search the value is obvious.The question in china is that the price of the company is often underestimated and some even are operated in dark-box.If there is no competitor outside the price of company will surly be overlooked.So a mature auction market is very necessary in which including indepent aduit institute and value-discover investors or competitor from outside.