Astudy On The Impact Of Management Power On Mergers And Acquisitions And Its Financial Effect Of State-owned Enterprises

Due to different institutions, the theories of Mergers and Acquisitions (M &) which were based on western developed capital markets can not be completely applied to China's. The State-owned enterprises confronted a much more serious "insider control" issue with the rising management power which owning to institutional defects and reforms of decentralization and interest concessions in the past years. The concentration of power and the increase of responsibilities have not brought management corresponding recompense. So, the unequal of power, responsibility and interest greatly inspired the opportunistic motives of management which lead to alienation of M &. The M & practice of Chinese state-owned enterprises need a new theory.This dissertation broke through the limitation of simply studying motivation and performance, brought management power to M & studying and opens the "black box" of Chinese state-owned enterprises M & activities. It followed the main line of "Institutional limitation of state-owned property - The formation of management power - An opportunistic act of management in M & - The financial effect of M & ". With the purpose of providing theoretical and empirical evidence for the relevant departments to make policy, it combined management power, executive compensation, M & and its performance and analysis the inherent mechanism of"success paradox " of Chinese state-owned enterprises M & activities.In this dissertation, 784 state- holding listed companies were selected as study subject in which mergers and acquisitions occurred between 2004 and 2006. It first studied the impact of management power to mergers and acquisitions, then examined the financial effects of mergers and acquisitions of state-owned enterprises, and finally collaboratively studied management power, financial effects of mergers and acquisitions and management compensation to explore the inherent connection between the three. It is found that the management power correlated positively with the number and the scale of mergers and acquisitions. That is the greater management power, the more likely an enterprise mergers and acquisitions occurs, especially when the management are reappointed. However, the evidence showed, after two years of M &, that the financial performance of sample enterprises had no significant increase compared with the M & year. Furthermore, the performance after two years is lower than after one year. This indicated that current state-owned enterprises mergers and acquisitions failed to improve the enterprise's financial performance, and the financial effect was still in the lower level. Further study found that the relationship between financial effect of mergers and acquisitions and executive compensation is nonlinear, executive compensation far exceeded the performance achieved by mergers and acquisitions, and management power and executive compensation is positive correlation. Empirical study also found the implementation of incentive assessment methods of SAC (State-owned Assets Supervision and Administration Commission) provided the possibility for the management to choose opportunistic behavior. The change of management compensation is more relevant with the enlargement of company and the increase of employees than with the performance of M &. It is shown that, with the concentration of management power, management has ability and motivation to lobby the government and the board of directors to mergers and acquisitions, and improve their own salaries and control benefits according to assessment methods.The dissertation suggested that management power and their opportunistic behavior in mergers and acquisitions should be under observation in the future. We should strengthen corporate governance mechanism, perfect motivation and assessment system reasonable guide the management of enterprises, and strengthen the management of state-owned enterprises mergers and acquisitions.