Investor Protection And Coporate M&A Performance: Evidence From Chinese Listed Companies

In transition economy countries, the institutional environment play an important role in understanding coporate financial policy,including coporate M&A.Many researchers in China hold that Chinaese listed companies M&A happened only to satisfy the controllings hareholder’s or local government’s self-interest.However,on the one hand, with the development of capital markets, corporate M&A waves come into being,on the other hand, investor protection system are gradually establishing and improving.It can’t give convinced explanation to research Chinese listed companies M&A from point of view of self-interest because self-interest M&A can not bring about merger benefits and coporate value. Obviously, we may omit some critical factors in understanding Chinese listed companies M&A.Investor protection is the most critical institutional factor in capital market system.Does and how Investor protection promote the development of merger and acquisition?Does and how Investor protection bring about M&A benefits? Based on related foreign literature and China reality, This paper will conduct a comprehensive research on the following issues from viewpoint of investor protection:Does investor protection of local province affect associated and non-associated M&A?How the bidders choose their targets’region in cross-province M&A?Does cross-province M&A bingabout synergy?What are the relationship between change of investor’s legal protection and coporate M&A?How non-tradable shares reform affect M&A benefits?How the deviation of cashflow right and control right and coporate governance affect M&A benefits?This thesis aims at establishing an analysis framework based on the above issues.This thesis consists of nine chapters.Major contents of each chapter are outlined as follow:Chapter 1 is introduction, which briefly introduces the research background,issues under research,research idea,research contents,and research improvement and innovations.Chapter2 is the literature review.In this chapter,the author reviews and comments on the literature about M&A in China and foreing coutries,about mainstream M&A theories.Chapter3 theretically analyse the relationship between investor protection and Chinese listed companies’ M&A performance. Based on the analysis of company boundaries using transaction cost economics and property rights theory,the author describe the limitation of the corporate boundary analysis; and then the author analyse the institutional environment of China’s capital markets, the characteristics of listed companies merger and acquisition; finally,the research ideas,research issues and subsequent empirical research framework are put forward.Chapter4 study on the synergy effect in cross-province M&A,taking the nature of property right into account.This chapter will reveal the mechanism of synergy in cross-province M&A.Chapter5 research how investor protection in 31 provinces in China affect M&A volumn?Are the effect same in local M&A and cross-province M&A? Are the effect same in associate and non-associated M&A?Chapter6 study on how the bidders choose their targets’ region in cross-province M&A?Are the choices the same in associate and non-associate M&A?Chapter7 study the relationship between change of investor’s legal protection and M&A performance,the relationship between non-tradable shares reform and coporate M&A performance from dynamic viewpoint of investor protection.Chapter8 examines how corporate governance affect M&A performance, especially paying attention on the deviation of cashflow right and control right.This chapter also study if regional investor protection constrain the exploitation of ultimate controlling shareholder.Chapter9 sums up the research findings of this paper, and reports the lessons we learn, the caveats about this research,and points out the direction for further research.This Paper has reached the following conclusions:First, This article supports the synergistic effect of mergers and acquisitions. We examine the cumulative abnormal returns to acquirers who are listed companies in 152 successful cross-province non-relating M&A during the period 2003-2008.We find that acquirers returns are positively related to investor protection of target provinces.Furthermore,when the investor protection of target provinces is higher than that of acquirers’, the cumulative abnormal returns to acquirers are higher.It means that investor protection affects synergistic effect of M&A by alleviating frictions.These findings only exist in those M&A whose acquiers are non-stateowned listed companies.Second, general speaking,the higher the regional investor protection is,the more M&A happen,including local area M&A,cross-province M&A,associated M&A and non-associated M&A.Third, in the non-associated merger, when the acquirers locate in southeast coast provinces,they choose the targets also locating in southeast coast provinces. when the acquirers do not locate in southeast coast provinces,they choose the targets locating in southeast coast provinces too.Namely,the acquirers like targets locating in provices with higher regional investor protection.Fourth, the change of investor protection add value to listed companies M&A.The benefits come from non-tradable shares reform other than investors legal protection change.Fifth, the bigger the deviation of cashflow right and control right is,the lower M&A CAR can the acquiers get.But,this negative correlation only exist in non-stateowned companies.The regional investor protection of targets’province may decease the exploitation exercised by ultimate controlling shareholders.Other corporate governance characteristics,such as chairman and CEO are the same person, ownership concentration, have no significant effect on acquirers M&A performance.