Chinese Listed Companies Merger Waves’ Motivation And Timing Empirical Research

Since 1984 China BaoDing textile machinery factory merger case, China merger market has developed rapidly, CSMAR financial database merger records shown that China market happened 297 merger activities in 1998, till 2013 China market achieved 6569 merger activities, average annual growth rate was 138%. Booming merger activities played an important role in country’s economic growth and improving efficiency of enterprises, in macro-level merger activities promoted integration of domestic capital markets and international capital markets, integration of China economies and world economy; enhanced China economy competitive power and quality; cultivated new economic growth points, developed advanced productive forces; promoted economic restructuring and industrial upgrading. In micro-level merger activities could optimize resources allocation, and promoted development of competitive enterprises; developed corporate control market, improved corporate’s governance structure. China One Belt and One Road’project strategy couldn’t do without merger activities; transformation and upgrading China economic were inseparable from merger activities; Chinese competitive enterprises participating international competition and Chinese high-tech companies great-leap-forward development couldn’t do without mergers activities.In contrast to China merger activities were "booming, theoretical study of mergers and acquisitions was lagging behind in China. Mergers theoretical study has stood phase of introduction and assimilation Western theories, because capital markets was set up in a short time and merger data accumulation was limited, mergers theoretical system based on China capital markets practice was far from established, in order to better guide and service China mergers practice, theoretical studies need break through and innovation.For example, in merger wave motives and timing characteristics fields, Western scholars have made great achievements:put forward industry shock,Tobin’s Q, market liquidity, market evaluation deviation and so on theories, researched cyclicity of merger waves, discussed time correspondence relationship of merger waves and economic cycles. However, due to there were wide differences in culture, economic systems, regulatory approachs, investors’ psychology between Chinese and Western, many Western merger theories couldn’t explain Chinese merger market, even contrary to actual practice of Chinese merger market. This paper applied Chinese listed companies merger activities data from 1998 to 2013 to empirical research merger wave motives and timing characteristics, wish to discover special operation rules of China merger market. Empirical research was divided into 2 parts,4 topics.Part 1:Listed companies merger wave motives empirical researchTopic 1. Reference point effect driven merger wave.This topic tested stock price index 13-weeks high,26-weeks high,52-weeks high impact on listed companies merger decisions,results shown stock price index 52-weeks high was an important reference point for Chinese listed companies’ merger decision, current stock price index lower than stock price index 52-weeks high, more mergers of listed companies will happen, reference point effect is an important driver of China listed companies’merger wave. Next, this topic examined whether Tobin Q, valuations deviation, stock prices, market liquidity four Western motives theories could explain China listed companies’merger waves, conclusions shown that other three Western theories couldn’t explain China merger waves except market liquidity theory has significant impact on China merger waves, the main reasons of this phenomenon was there is a big difference in merger investor maturity, market regulation system between China and Western.Part 2:Listed companies merger wave timing characteristics empirical researchTopic 2:Seasonality of overall merger activities.Previous scholars were more concerned with several years or even decades merger wave periodicity, but few scholars studied aggregate merger activities’cycle characteristics within a year (seasonality), the topic applied X12 seasonal adjustment model to test Chinese listed Companies aggregate merger activities time series, results shown that Chinese listed companies aggregate merger activities had significant seasonality, March and April, August, December were three peak seasons of merger in a year, stock market month effect; weather effects and stock market month effect; earnings management and merger subject speculation are possible causes of the three peak seasons. The findings will help regulators to develop new policies protecting interests of investors, but also guide investors rational decision to catch better merger opportunities.Topic 3:Time corresponding relationship of merger wave and stock market bubble.Firstly, this topic applied duration Markov model to test the stock market bubble, determination time period of stock market bubble, next compared time period of merger wave and stock market bubble, then tested relationship between stock prices decrease sharply and number of listed companies mergers by econometric methods. The results shown that merger wave of Chinese listed Companies always takes place in stock market low tide period while positive stock market bubble bursted or in negative stock market bubble,no merger wave happened in stock market high tide period. The phenomenon was mainly due to cash payments were overwhelmingly dominant, merger investors immature.Topic 4:Time corresponding relationship of merger wave and economic cycle.The topic used HP filter model to divide quarterly GDP data into trends component and fluctuation component, on the basis calculated time periods of economic expansion cycle and economic contraction cycle, next compared merger wave time period with economic contraction time period, then examined time correspondence relationship between merger wave and economic contraction by econometric tools, the results shown China merger wave and economic contraction existed stable time correspondence relationship, number of mergers will synchronous growth when economy enter contraction cycle, at same time economic contraction effect on number of mergers with a lag, when lag period was six months, economic contraction the greatest effect on number of mergers.This paper on basis of empirical research proposed new viewpoints of Chinese listed companies merger wave motives and time characteristics, enriched and expanded Chinese merger theoretical system, these new viewpoints have some references to capital market regulators formulating policies,at same time are benefit to guiding merger investors rational decision.