The Researth Of Bank Connection’s Influence On The Decision And Performance In Mergers And Acquisitions

M&A is one of the important means of modern enterprise resource integration and rapid expansion. Enterprises in china have experienced strong capacity expansion in the past a few years, especially after the 2007 US subprime crisis. It is imminent for economic structure adjustment and upgrade. To achieve the transformation of economic growth and promote the optimization and upgrading of industrial structure and optimize the allocation of resources through mergers and acquisitions are strategic significance. However, the existing literarure on M&A in the financial field focused on three aspects, acquisition motivation, payment method of M&A and M&A performance, ignoring the merger implementation of resource conditions, potential debt financing capacity. M&A is a system which needs a lot of financial support, financial resources is not a key factor but also causes firm to involve in mergers and acquisitions. For historical reasons, there is more serious credit discrimination for our private and other non-state-owned enterprises, companies and banks establish connection to circumvent these regime obstacles. These connections reduce the information asymmetry between banks and enterprises, the company’s financing costs, easing the company’s financial constraints, increase debt capacity of enterprises, increase the company’s financial resources. But there is few literature about relationship between bank connection and M&A.Based on the principal-agent theory, asymmetric information theory, social network theory of capital and resources, financing constraints, the thesis analyzed and empirical tested the effects associated with bank connect and M&A using China listed companies from 2006-2012. The tesearch process follows three main lines:(1) The first main line is the relationship between bank connection and the mode of M&A, test the impact of defferent bank connection on the possibility of M&A. the number of occurrences, diversified M&A, cross-regional M&A; (2) The second main line is the impact of bank connection on the pay method of M&A; (3) The third main line is the impact of bank connection on the performance of M&A and their interaction on performance of M&A.The empirical results of this paper show as bellow:(1) State-owned enterprises are more inclined to choose the equity connection, rather than state-owned enterprises, non-state-owned enterprises are more inclined to use the the Bank background connection in board of directors; (2) Overall, the possibility of the occurrence of M&A and acquisitions frequency was significantly higher for bank connection companies than that of non-bank connection companies, However, the relationship is insignificant between bank connection and diversification (cross-regional) M&A; (3) The potential debt capacity of bider significantly affect the payment method of M&A, bank connection company would prefer cash payment; (4) In the performance of M&A, whether it is bank connection, or non bank connection, or as a whole, shareholders received a significant positive cumulative abnormal return (CAR), however, with respect to non-bank connection, the bank connection significantly reduces the wealth effect of M&A, further classify bank connection into equity connection and bank background connection in board of directors, the relationship between bank background connection in board of directors and M&A performance CAR is not significant, and equity connecion between banks and enterprises can significantly reduce the M&A performance CAR, which shows the impact of bank connectio on CAR is achieved by equity connection; (5) the interaction effect between bank connection and diversification M&A (cross-regional M&A and cash payment method) reduces CAR.This paper ananlyzed the relationship between bank connection and M&A, these results indicat that bank connect is a double edged sword, on the one hand, bank connection improve the debt ability of enterprises and the occurrence of mergers and acquisitions, on the other hand, owing to the relationship finance, the supervise effect of bank liabilities become weak, resulting in a value-destructive acquisitions, lower stock market reaction for bank connection companies. So, enterprise, bank and government need to work together to govern the relationship financing. For enterprises, them need to constantly improve the corporate governance and strengthen the management of incentives, monitoring and disciplinary. For banks, they need to improve corporate governance mechanisms, regulate bank behavior. Innovative financial services, optimize the allocation of credit resources. For the relevant regulatory authorities, need to strengthen the credit environment, continue to modify and improve the relevant legal system, strengthen supervision and management relationship financing. Through the joint efforts of enterprises, banks and the relevant regulatory authorities, give full play to the positive role of the bank connection coin, inhibiting the negative effects of this coin to improve the efficiency of credit allocation, increasing mergers and acquisitions performance.