Journal of Service Science and Management, 2012, 5, 348-354 Published Online December 2012 (
Research on Wealth Effect of Asset Reorganization in
Tourism Industry: Case Study Based on Holistic Listing
of Overseas Chinese Town Group
Tingli Liu, Songling Yang, Wei Zhang
Economic and Management School, Beijing University of Technology, Beijing, China.
Received August 5th, 2012; revised September 6th, 2012; accepted September 18th, 2012
This study extends previous research by examining how holistic listing affects the short-term and long-term wealth for
listed company in China. Case study, event study and financial ratios analysis methods are used in the paper. We meas-
ure short-term wealth effect by the extra returns and measure long-term wealth by the five value creation indexes. The
results show that holistic listing of group enterprise injects new motivation for value creation and helps shareholders to
share both long-term and short-term wealth effects. Our research has implications for group enterprises that are striving
to enhance corporate value through capital operation.
Keywords: Holistic Listing; Wealth Effects; Value
1. Introduction
The twelfth five-year plan for national economy and
social development of the People’s Republic of China
clearly stated that we should take the promoting service
industry development as the strategic emphasis of indus-
try upgrading. According to The state council opinions
on speeding up the development of tourism published on
December 2009, tourism was promoted to national strat-
egy in China and clearly put forward to cultivating a
group of competitive large tourism enterprise group. Fu-
ture more, the twelfth five-year plan for national tour-
ism development of People’s Republic of China indi-
cated that the basic direction of development of tourism
in China is to cultivating large tourism enterprise group
with clear primary business, developing route and com-
petitive advantages. We can safely infer that the tourism
group will play a pivotal role in the process of construct-
ing strong tourism country. The possibility of the Chi-
nese tourism enterprise groups grasp the opportunity to
develop tourism national brand and realize rapid devel-
opment depends on their sustainable value creation abil-
Overseas Chinese Town (OCT) group is a large-scale
state-owned enterprise in China. The major business of
OCT is tourism, OCT already has received 150 million
tourists by the end of year 2009 which made OCT is the
first brand of tourism industry in China. OCT exclusively
launched the Shenzhen OCT holding co. and listed on
Shenzhen securities market in 1997 (stock referred to
OCT A). As the listed subsidiary, OCT A provides a
platform for capital operation of OCT group. The main
business of OCT group implemented holistic listing on
capital market in December 2009, which made OCT
group has better value creation dynamic mechanism and
more clear appeal for value growth. OCT group took the
lead in whole group listing in tourism industry in China,
so the asset reconstruction mode and the economic ef-
fects of whole listing has reference and demonstration
effects to other large-scale tourism groups.
This paper analyzes the wealth effect of tourism asset
reconstruction and discusses the realization route for
value promotion with case study method based on both
capital market and financial data. Our results contribute
to the capital operation and value enhancement of tour-
ism enterprises in China.
The study is organized a follows. Section 2 reviews
the related literatures and theory. Section 3 describes the
holistic listing model of OCT. We analyzes the short-
wealth effect and long-term wealth effect of OCT respec-
tively in Section 4 and Section 5. Section 6 concludes.
2. Theory Basis for Holistic Listing and
Value Creation
Different from the western developed countries, Chinese
capital market began at the transition period. In order to
fulfill the listing requirements, state-owned enterprises
Copyright © 2012 SciRes. JSSM
Research on Wealth Effect of Asset Reorganization in Tourism Industry: Case Study Based on Holistic Listing of
Overseas Chinese Town Group
usually adopted spin-off method and listed the partial
sound assets on capital market. The function of capital
market has continuously improved with the implementa-
tion of the reform of non-tradable, making the interests
of major shareholders and small-medium shareholder
convergence. Under this background, more and more
listed companies intend to increase the scale and com-
petitive ability of business by the holistic listing.
Holistic listing refers to the whole business of state-
owned enterprise were reconstructed as a joint stock com-
pany and publicly offering stocks, meanwhile, withdraw
the original enterprise [1]. The document of The State-
owned Assets Supervision and Administration Commis-
sion on promoting the capital adjustment and restruc-
turingof state-owned enterprise clearly pointed out sup-
porting enterprises with sound assets and major business
to achieve whole group listing on capital market, encour-
aging the listed state-owned companies to absorb the
whole main business by means of increasing endowment
spread and acquiring assets. After the reform of non-trad-
able shares, the theme of M&A in Chinese capital market
is major shareholders’ assets injection into listed com-
pany and even whole group listing of parent company [2].
The special phenomenon attracted the attention of schol-
ars, for example, Guan analyzed the advantages and dis-
advantages of whole group listing [3], Zhang explored
the realization route of whole group listing based on
boundary theory, internal capital market theory and the
financial management goal [4], Ou Yang & Tang made
empirical research on forty companies that finished
whole group listing and found the whole group listing
contributed to the performance promote and stock raise
[5]. However, Zhu et al. found that additional stock issue
for major shareholder may be the tunneling channel ba-
sed on case study [6].
Modern enterprise has different sections with different
investment opportunities, in order to maximize the total
interest, the headquarter need one visible hand to allocate
resources such as labor, technology and capital to im-
prove the investment effectiveness. For group enterprise,
much money effect and spare money effect are two paths
can be used to increase corporate value, the former refers
to the subsidiary of group enterprise can acquire more
external capital than as a independent enterprise; the lat-
ter refers to group enterprise can allocate the limited
capital in different projects. Whole group listing help the
internal capital market realize the two functions, which
enable group enterprise to own bigger financing platform,
to enhance the capital effective and to avoid expropria-
tion of listed company by major shareholder, thus benefit
the long run development of group enterprise.
Holistic listing also benefits to promote corporate value
from the scale-effect and synergistic-effect. The internal
scale economy lies in adjustment and supplement of as-
sets through whole group listing; the external scale econ-
omy lies in overall strength enhancement, consolidating
market shares of enterprise, providing comprehensive
professional service and thus satisfied different market
needs [5]. From the viewpoint of diversification strategy,
holistic listing contributes to adjustment of assets and de-
crease diversity operation risk. From the viewpoint of
vertical integration strategy, whole group listing benefits
to integrate the value chain companies into one trade
platform, by which reduces transaction costs.
Based on principal agent relation, private offering helps
to increase the equity of major shareholders and unify the
interests of major shareholders and corporation, which
benefits to alleviate the agent problem and increase cor-
porate value [7]. Myers and Majluf pointed out that pri-
vate offering may be viewed as a signal that managers
believed the market value higher than the intrinsic value
due to managers have more information about the com-
pany, so the rational investors may reduce the evaluation
of corporate value when private offering announcement
published, thus induce the negative market reflection [8].
Zhang insisted that the market reflection to whole group
listing via private offering to major shareholder was bet-
ter than other mode of private offerings because the con-
trolling shareholder have motivation to invest sound as-
sets and project to listed companies [9]. According to the
information hypothesis, the more possibility of underes-
timation of current assets value or investment opportuni-
ties, the more information effect, thus the market reflec-
tion will be stronger [8,10].
3. The Holistic Listing Mode of OCT Group
OCT A issued stock publicly in Shenzhen stock ex-
change at 10 September 1997. OCT group successfully
invested the owned shares of Shenzhen WINDOW of the
WORLD, Shenzhen SPLENDID CHINA Co., Shenzhen
HAPPY VALLEY Co. and Changsha WINDOW of the
WORLD into OCT A after OCT A listed on stock market.
OCT A became a holding company specialize in the
theme park as the core of the tourism industry and its
relevant industry operation. OCT group invested the 40%
shares of HUA FANG Co., one sub-company profes-
sional engaged in the real estate business, into the OCT
A respectively in 2000 and 2001, from then on, OCT A
gradually formed the comprehensive advantage of com-
bination of tourism and real estate businesses. The in-
come of OCT A was relatively single and tourism was
the main source of income before 2006, the sales income
of real estate and hotel gradually increased after 2006.
Now, OCT A has been preliminary formed the “tourism
plus real estate” operation mode and become the major
economic growth point of OCT group. The essence of
Copyright © 2012 SciRes. JSSM
Research on Wealth Effect of Asset Reorganization in Tourism Industry: Case Study Based on Holistic Listing of
Overseas Chinese Town Group
Copyright © 2012 SciRes. JSSM
the mode lies in to improve the environment and promote
the land price based on theme park; rapid recovery of
real estate in turn helps to provide development capital
for theme tourism business.
OCT group was the sole non-tradable shareholder of
OCT A before the reform of non-tradable shares. In 2006,
major shareholder of OCT A came up with the scheme of
“every 10 shares send 2.8 shares”, thereby, realized the
full circulation of OCT A shares. Whole group listing
can help OCT A to meet commitment that promised in
the reform of non-tradable, to better protect the interests
of shareholders and listed company, to improve the op-
erational mechanism of OCT group and listed company,
to promote the development and construction of large
scale project, and finally to achieve the goal of group and
listed company.
The model of whole group listing can be divided into
three types: the first model is Reverse acquisition model,
that means the listed company acquires the assets of
group; the second is Merge between listed holding cor-
porations, the premise of this model is that there are two
or more listed companies in the group and the parent
company has almost no operational business; the last
model is group company acquires the listed company and
conducts IPO. Compared with the above models, the
third model has higher requirements for Group Company
including meeting the listing requirements and experi-
encing long examination and approval procedures.In
practice, the first model is more simple and feasible, and
Ou Yang & Tang statistics found that this model ac-
counted for 95% of whole group listing in China [5].
Reverse acquisition model is a feasible way for OCT
to finish the whole group listing in a short time because
OCT group has only one domestic listed company. Fig-
ure 1 shows the business construction of OCT group
before whole group listing.
Through privately issued to group company, OCT A
purchased three kinds of assets from 12 companies con-
trolled by Group Company including tourism real estate,
hotel and other relevant business. The shares marked on
the unlisted companies in the Figure 1 were purchased
by OCT A during the reconstruction. OCT group sold all
the operational assets to listed company and became
Holding Company after the asset reconstruction. The
equity ratio hold by OCT group increased from 48.26%
to 56.36% and the controlling power wasn’t changed.
OCT group has more clear and integrity business con-
struction after whole group listing, as the holding com-
pany, OCT group directly control two listed companies
and OCT A have five boards of businesses including
theme park, tourism real estate, hotel, paper packing, and
other business.
Other operations
Tourism real estate
Hotel operations
OCT Group
OCT AKonka GroupOCT Asia
Huazhong Power
Water and power
Prope rt y
management Co.
In te rn a ti o n al
media Co.
Hongkong OCT
Hotel Management
Hotel Group
Chengdu OCT
Shanghai OCT
Taizhou OCT
OCT investment
Huafang Co.
48.2616.6 8
listed businesses
unlisted businesses
Beijing OCTEast OCTYunnan OCTTianjin OCT
(Notes: The hatched section shows the companies controlled by OCT A before reorganization; the numbers in brackets
represent shares owned by OCT A)
Figure 1. Business structures of OCT group before reconstruction.
Research on Wealth Effect of Asset Reorganization in Tourism Industry: Case Study Based on Holistic Listing of
Overseas Chinese Town Group
4. The Short-Term Wealth Effect of OCT
Group Holistic Listing
Wealth effect refers to the wealth of financial assets holder
increase or decrease as the asset price up or down, in turn
to stimulate or suppress consumption [11]. The change of
share’s wealth is the mirror image of corporate value
trend. The price change of stock before and after asset
restruction as well as corporate performance change pro-
vide sound research basis for wealth effect.
The short-term wealth effect of the paper focuses on
the stock price and return fluctuations raised from asset
reorganization, while the long-term wealth effect concern
the change and trend caused by asset reorganization. The
Table 1 shows the process of asset restructing of OCT A.
This paper selected 9 Jun. 2009 as the event day of the
whole group listing and the widow period of event were
each 20 days before and after event day, together 41 days.
The reason for relatively longer window period is that
some event information had been leaked before 9 June
2009. Figure 2 shows the changing trend compared be-
tween OCT A stock returns and Shenzhen Compound
index A returns during the window period, from which
we can see that the changing trend of OCT A similar to
that of the market, but the amount of variation of OCT A
is bigger and returns of OCT A is higher than those of
Compound index A.
In order to explore whether the whole group listing
brought extra returns for listed company, the paper se-
lected 120 trading days as forecasting period and adopted
market model to estimate the abnormal returns of OCT A.
The model is following Formula (1).
tt m
 (1)
In the above model, ARt, is the abnormal return of firm
i in day t; Rt is the reality return in day t, the natural loga-
rithm of the ratio of closing price; α and β were obtained
from regression on return data of estimated days; Rm is
the market return.
Figure 2. Returns change trend of OCT A during the win-
dow period.
Table 1. The process of asset restructing of OCT A.
Time Event
19 May 2009 Sidecar announcement for significant
asset restricting
8 June 2009 Pass the agreement on issuance of stock
to purchase assets
9 June 2009 Official launch announcement and
restore trade
11 November 2009 Private offering shares began trade,
restructing completed
The regression outcome is following Formula (2):
0.001 0.924
Based on Formula (2), the abnormal returns for some
key point are listed on following Table 2.
It can be inferred from the Table 2 that the average
abnormal return is 1% for the event window period [–20,
20] and pass the T-test of 10% of the significant level,
the abnormal return reach up to 13.4% during the win-
dow period [–15, 15] and pass the T-test of 5% of the
significant level. In addition, the paper also calculated
the accumulative abnormal returns for each observation
period, which all significant in statistic. We can draw a
conclusion that the market reacted to the information of
whole group listing positively and thus increased the
short-term wealth of shareholders.
From the above evidence, we can infer that whole
group listing event transferred information to market that
quality assets had been invested into listed company and
controlling share of major shareholder increased, which
have positive significance and market gave positive re-
5. Long-Term Wealth Effects of OCT Group
Holistic Listing
Assets of OCT A increased by 110.49% since the re-
struction and the liquidity asset has a sharp rise with in-
creased by 407.85%, at the same time, increase in the
proportion of long-term debts and decrease in the propor-
tion of interest-bearing liabilities contribute to the corpo-
rate liquidity and lighten the burden of debt repayment.
The sound asset structure in turn promotes income struc-
ture more reasonable and the tourism real estate mode
more outstanding. Table 3 lists the major value creation
The financial objective of OCT is to maximize the
value of stockholder, from the comparative analysis, we
can see that the major value indexes in 2010 are all better
than those in 2009. In order to compare OCT A with
other companies under the same industry, according to
the industry division issued by CSRC (China Securities
Copyright © 2012 SciRes. JSSM
Research on Wealth Effect of Asset Reorganization in Tourism Industry: Case Study Based on Holistic Listing of
Overseas Chinese Town Group
Table 2. Abnormal returns of OCT A.
period AR T-value Sig. (2-tailed)
4.20 - 7.8 [–20,20] 0.01 1.894 0.065*
4.27 - 7.1 [–15,15] 0.134 2.257 0.031**
*p < 0.1; **p < 0.05.
Table 3. The major value creation index of OCT A.
Index 2010 2009 2008
Sales volume (RMB billion)
Growth rate
Income before tax (RMB
Growth rate
Net profit belongs to
shareholders (RMB billion)
Growth rate
Earnings per share
Growth rate
Return on equity
Growth rate
Regulatory Commission), this paper selected 19 compa-
nies as the comparison sample (as shown in Table 4).
From the financial data comparison of the tourism indus-
try, we can infer safely that the value creation ability of
OCT A is the industry leader. The Table 4 also reflects
that the difference between OCT A and industry average
has been narrowed year by year, which illustrate that
OCT A still need to consolidate and develop the new
value growth and give full play advantages of whole
group listing.
Table 5 shows the sales sources and composition of
OCT A. It can be inferred that the main sources of reve-
nue are tourism and real estate business. With high gross
margin, tourism and real estate constitute the core busi-
ness of value creation. Besides, paper packaging as the
new business plate is the new economic growth point
fostered by the group. Year 2010 was the first whole
business year, from the Table 5, we can see that the pro-
portion of real estate income increased obviously and the
high gross margin contributed to form value creation
leverage effect. The reason of high gross margin of real
estate is that relatively lower land cost for tourism project
construction compare to pure city real estate develop-
According to the above data and analysis, it can be in-
ferred that OCT A is a capital operating platform for
Table 4. Value creation index comparison under industry.
Index 2010 2009 2008
OCT A 19.2% 17% 33.5%
Net profit marginIndustry
average 14.1% 6.3% 1.5%
OCT A 0.98 0.55 0.46
Earnings per share
(RMB/share) Industry
average 0.38 0.21 0.13
OCT A 25.71% 17.08%16.24%
Return on equity
average 10.7% 7.4% 4.8%
Table 5. Sales sources and composition of OCT A after the
asset restruction RMB billion.
Sales Percentage Gross margin
200920102009 2010 20092010
7.069.4486.5% 54.8% 42.36%47.72%
Real estate
income 3.257.0329.8% 40.8% 58.06%59.45%
Paper packaging
income 0.6040.765.5% 4.4% 11.38%12.02%
total 10.9117.23 1 1 45.82%50.94%
OCT group asset restruction that make the listed com-
pany has more clearly business constitute and high abil-
ity of value creation. Indisputably speaking, OCT A keep
the industry lead.
6. Conclusions
6.1. Holistic Listing Provides Optimized Value
Creation Platform
Holistic listing of OCT Group injects new motivation for
value creation and helps shareholders to share in long-
term and short-term wealth effects. In the short term,
capital market reacted positively to the event of whole
group listing and created significant positive abnormal
returns. In the long term, ability of value creation for
shareholders is relatively high both on basis of horizontal
and vertical analysis. The intrinsic reasons for corporate
value promotion are as following.
On the one hand, the business boundary of Group
Company becomes clear through whole group listing.
During the development process of OCT group, formed
many subsidiary companies which have business connec-
tion but belong to different listed company, thus induced
a lot of related transactions and vague the transaction
boundary. For example, there are 5 sub-companies of
OCT group had connected transaction with OCT A.
Copyright © 2012 SciRes. JSSM
Research on Wealth Effect of Asset Reorganization in Tourism Industry: Case Study Based on Holistic Listing of
Overseas Chinese Town Group
Whole group listing makes these assets become an inte-
gral part of whole and contribute to sustainable devel-
opment of public company.
On the other hand, holistic listing broadens the financ-
ing channel for Group Company. OCT A indirectly con-
trol OCT Asian Co. via controlling the sub-company
Hong Kong OCT, which helps to constructing a sound
financing channel on oversea capital market and realize
complete control on real estate business in the OCT
group, as well as avoid competition between sub-com-
panies belongs to one group.
6.2. The Path of Promoting Corporate Value
through Holistic Listing
Relying on “tourism + real estate” double drive mode,
cultivating paper packaging business as new economic
growth point, OCT A has been forming relatively clear
value creation path.
The value creation mode of OCT A can be summa-
rized as: based on development of tourism projects and
brought theme park brand into full play to realize the
maximize margin effects of tourism development. Mean-
time, the OCT A also mine and cultivate the new value
contribution point and form the sustainable value growth.
OCT A also constructed the sound theme park industry
chain including tourist attraction, hotel, culture perform-
ing and digital entertainment. Real estate is extension and
expansion of theme park industry value chain. The pro-
portion of hotel business and real estate business have
been raised since the whole group listing, which strength
both internal and external industry chain. The replicabil-
ity feature of business mode of OCT in favor of leverage
effect of value creation and increased the value volume
through scale effect.
6.3. Inspiration of Case Study
This case study has positive reference and enlightenment
for other tourism group companies: the source of value
creation is perfecting and expanding of industry chain;
the major method of value promotion is capital operation.
The value growth of OCT group can be divided into
three stages. The first stage was from the company foun-
dation to year 2006, the tourist industry development
with the core of theme park construction laid the industry
leading position and gradually formed the internal indus-
try chain of tourism. The second stage was from year
2006 to year 2009 before whole group listing, the real
estate business increased rapidly and brand effect en-
hanced obviously in that period, accompanying with
tourism industry chain were expanded outwardly and
gradually formed the double drive mode of “tourism +
real estate” that internal and external linkage. The last
stage began from year 2009 after the whole group listing,
the assets of OCT group started to be operated in one
capital platform, and thus the factors including manage-
ment structure optimization, broaden financing channel,
reduced by affiliated transactions and competition be-
tween sub-companies in one group provide shareholders
with more reliable value creation sources.
In the framework of Group Company, take tourism
business as core and extend to relevant industry, actively
participate in capital market, thus finally to promote the
value creation ability of Group Company, which may be
one solution about the strategy development of Group
7. Acknowledgements
Appreciate the following foundation: National Social
Science Foundation of China (No. 11CGL026); China
Postdoctoral Science Foundation (No. 20090460450);
The Education Committee of Beijing (No. PHR201008-
308); Humanities and Social Sciences Planning Fund
Supported by Chinese Ministry of Education (No.10YJ-
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