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A Research On Corporate Control, Liquidity And Mergers & Acquisitions Performance

Posted on:2016-12-18Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y S ZhouFull Text:PDF
GTID:1109330503453304Subject:Business management
Abstract/Summary:PDF Full Text Request
M&A is an important strategic expansion action which can allocate resources to diversify business risk, improve efficiency, increase value and achieve in growth. But M&A performance always was volatile and cyclical, the factors that lead to M&A performance difference may come from inside, or from the outside, andit may also be the result from the interaction of internal and external factors. During the past half century, mature capital markets in the West, especially in USA, has gone through several M&A waves. These M&A not only promoted the enterprises to achieve their goals, but also promoted the economy to develop rapidly in their industries and regions, which meant that it became an important way of national economic growth. When comes to the twenty-first Century, along with the rapid growth of economy and maturity of the capital market, there are more and more mergers and acquisitions in China. From 2005 to 2006, new steps have been taken in the reform of the Equity System in China capital market. This reform turned state-owned shares and legal person shares which cannot be traded, to the Tradable shares. It is a great leap in the history of Chinese enterprise M&A. In 2006, the number of M&A in Chinese listed companies is 2087, and the number is 4579 in 2007 which is over twice of that in 2006. It is really worthy of attention. The reform of the Equity System in China capital market transfer the stock equity of major shareholder, from non tradable shares to tradable shares, which essentially changed the incentive mechanismof the major shareholder and the corporate control configuration. On the one hand, their wealth and business performance is directly related to the performance of the stock market. The benefits of major shareholder are of high sensitivity to the price of the stock market; therefore, business performance can be evaluated more quickly and directly, which greatly changed the behavior of the major shareholder. On the other hand, with the major shareholders’ shares(nearly 2/3 of the total market shares) transferring into tradable ones, the stock market owns ahuge number of shares available for trading and increases its market capacity. Meanwhile, because of the major shareholders pay more attention to the performance of stock markets; it attracts many smaller investors, which greatly enhances the activeness and liquidity of the stock trading. So the number and the performance of M&A in Chinese listed Companies increased rapidly when the reform of the Equity System was completed in 2006.What pushed this increase, the behaviors of the major shareholders or the enhancement of stock liquidity or both of the two factors, is still unknown and required to be solved by the researchers.M&A is essentially an investment behavior, the investor will take into account the return on investment, and the bidders will also consider acquisition performance. M&A performancedepends on selecting suitable acquisition objects, and selecting the appropriate acquisition opportunities. When the acquisition targetsscope iscertain, the choice of acquisition targets depends on company decision-makers, that is the controller of the company or companies control configuration, so the company control will ultimately affect the M&A performance; At the same time when the company control has been given,then the acquisition performance depends on the timing of the acquisition, the best choice depends on the timing of merger and acquisition of market in trading conditions, the good condition are suitable for business sustainable development, and fit in with business structure, and good condition is to reduce the transaction costs and integration risk of acquisitions, and reduce transaction costs mainly depend on market liquidity, so market liquidity will therefore affect M&A performance.This study selected corporate control and the liquidity factors to study their impact on M & A performance, the main conclusions of the study are the following:1.An empirical study shows that M&A performance is influenced by the control of the Company and liquidity factors. The research shows that the improvement of M&A performance after 2006 is closely related to the improvement of company control and the liquidity followed theShareholding institution reform in 2005.2.When only study the company control, the research found that the company control has a significant impact on the company’s M&A performance. The different major shareholders have different M&A performance. The national major shareholder has negative impact on the short-term M&A performance. The legal person major shareholder has a positive influence on corporateshort-term M&A performance; and in the impact of major shareholder on the long-term performance, the effect of national major shareholder on long-term M&A performance is not significant, legal person major shareholder has a positive impact on long-term M&A performance.When increasing the equity share of the major shareholders will bring more long-term performance, but its impact on M&A performance is nonlinear; and the nation actual controller and legal person actual controllerhave a significant adverse effecton corporate long-term M&A performance; and the balances can effectively increase the company’s long-term M&A performance.3. When only investigate liquidity effect, the research found that the three levels of liquidityvariables produced a significant effect on the merger performance. First, the money market interest has a negative impact on theM&A performance, the high interest rates is, the low the M&A performance is; Second, the impact of stock market liquidity on M&A performance is positive, the high the stock market liquidity is, and the high the M&A performance is; Third, the impact of individual stock liquidity on the company’s long-term performance is negative, that is, when the individual stock liquidity is high, its long-term M&A performance is low.4. When inspected the control and liquidity variables how to jointly affect the performance of M&A, the research found the interactive effects of control and the liquidity on the merger performance.Company’s Control has less adjustment effect on the relation between liquidity and M& A performance, and liquidity has more significant adjustment effect on the relation between control of the company and M&A performance. When the money market liquidity is low, the relation between company control and performance is more significant; and when market liquidity is higher, the relation between the performance and the control is more remarkable. And the adjusted effect ofstock liquidity on the relation between mobility control and M&A performance is not significant.Domestic and foreign scholars have study the factors affecting the M&A performance for many years, but whichis completely different with this research inresearch perspective and research framework. Compared to previous studies, the main innovation and the main contribution of this study are the following:1. Taking into account the interaction between company control and liquidity, this study build the framework that combine the company control with the liquidity to study the effect of those two factors on M&A performance, which is the innovation in research framework. The M&A performance is related to object selection and acquisition timing, the timing of M&A and target selection may affect the performance of M&A simultaneously, and so thecompanycontrol and liquidity may also have an impact on M&A performancesimultaneously. On the basis of taking into account theinteraction between liquidityand control, this paper studythe joint effect of control and liquidity on M&A performance, and study how the effect of company controlled on M&A performance adjust by the liquidity. This article explained the mechanism that how the internal company control and external liquidity factors jointly affect the M&A performance onthe perspective of integration, this is the innovations of this study.2. M&A target selection isone of the key factors that affect the performance of an acquisition. The paper introducedcompany control as an important factor affecting target selected, and design the control variables, study the effect of company control on M&A performance. Theoretically, M&A performance depends on the proper object selection and appropriate timing of the acquisition, the research is different with other research in perspective, and selecting company control as targets selection decision makers, and designed a composite company control variable, study the impact of firm control on the performance of the merger, which is a perspective that other scholarsno systematically researched. andwhendescribing the control variables, this research has fully take into account the complex nature, using multiple dimensions variables to describe the control characteristics and control structure, and strive to fully and accurately summarized the connotation of control.So this study is innovative in research perspectives and variables selected.3. Thetiming is the second key factors affecting M&A performance, this article innovatively use liquidity as a variable to describe the influence of liquidity on thetimingofacquisition, and use three levels of liquidity to study the effects of various levels of liquidity on M&A performance, which expand the range of liquidity research. In the case of acquisition targets identified, the timing of M&Ais related to M&A performance.In This study, theliquidity is used as trading conditionsto directly affect the timing of acquisitions, thus affect M&A performance. And the paper selected macro liquidity, market liquidity and stock liquidity to study their impacts on M&A performance respectively, such study has little did by the previous scholar, which is the innovation of this study.4. Compared with the previous studies, this research has selected M&A samples from longer time, whichfrom 2004 to 2012 and involved for ten years. This larger-scale data has ensured the relative reliability of research conclusions.
Keywords/Search Tags:corporate control, Liquidity, interaction, Mergers and acquisitions, M&A performance
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