| On a basis of the statistics of world-class market data releasing company DEALOGIC,the turnover of China's merger and acquisition (M&A) transactions which amounted to 65 billion U.S. dollars overtook Australia for the first time in 2005 and China evolved into the largest M&A market in Asia-Pacific region except Japan. No element is more influential than merger and acquisition in demonstrating market's efficiency and innovative. By means of merger and acquisition, China's capital market will play a positive role in lubricating China's integration into the world economy and accomplishment of economic transition and structural adjustment. Merger and acquisition is an eternal topic in security market. Especially performance of merger and acquisition is of outstanding essence. Performance effect has long been a controversial issue in academic sphere. The focus of the debate is not only reflected in the conclusions but also outlined in research methods. The disparity in sample selection accounts for the heated dispute.The vast majority of previous research concentrated on samples ranging from 1998 to 1999 in China's capital market which failed to accurately display the actual state of merger and acquisition of our listed companies at the present. Period between 1998 and 1999 is the development stage of merger and acquisition of listed companies accompanied by the promulgation and implementation of and which touch off a new round of fulfillment and progress for merger and acquisition of listed companies. Current practice of M&A and assets restructuring exhibit distinct characteristics from ever before owing to the factors mentioned above. Merger and acquisition of companies will be gradually standardized and systemized along with the continual perfection of law system. Thus a lot of realistic significance will be obtained in the study. It is essential that empirical analysis on merger and acquisition of listed companies have to be performed based on the samples after 2002, ground of representative samples of the M&A in 2003 and 2004, this paper probes into the performance variations and influencing factors of merger and acquisition of China's listed companies in the new era, with an aim to reaching some constructive conclusions. The article is divided into seven chapters. The former chapters are discussed in the theoretical analytical framework while the following chapters are angled in a practical point of view. The concrete structure is listed as follows:Chapter I refers to introduction of M&A theory of company. The article carries on scientific definition and economical explanation to connotation, characteristic and types of M&A, which are indispensable prerequisites for evaluation.Chapter II provides a historical review on M&A practice at home and abroad. In this chapter, we apply a brief retrospection to the history of merge and acquisition of domestic and foreign enterprises, an assessment to present status of M&A market and a preview to the future development of M&A market.Literature analysis and comments on the performance of company's merger and acquisition are presented in chapter III. When it comes to M&A effects, two approaches are habitually adopted by home and overseas scholars: one is event study based on stock price. The other is financial index method which takes advantage of financial data. This chapter summarizes empirical analysis of the two measures at home and abroad in detail and evaluates the applicability of them in order to explore the most appropriate method for the study concerning performance of merger and acquisition in China.Chapter IV illustrates research methods and sample selection. This chapter revolves around selected companies, extraction of financial indicators, proposal of hypothesis and empirical research methods which are involved in the empirical study.Chapter V introduces the empirical analysis on affecting factors of M&A's performance. The article utilizes the factor analysis to a comprehensive study of the dynamic change of performance before and after the merger. Then we compare overall samples, performance of the acquired company and the target company. Finally, this paper carries through empirical testing on affecting factors which are likely to have an impact on the performance of acquired companies and targeted companies respectively.Chapter VI generalizes classification research of performance of merger and acquisition. M&A's performance of listed companies varies in accordance with different forms of M&A. We examined affecting factors in Chapter V. This chapter can be regarded as a further extension of the study in Chapter V which elaborately inspects the influence of M&A's specific means on performance.According to the former empirical results, we capitalize on classification study to notable factors, looking forward to carving out the time evolution curve of performance.We succeed in acquiring some meaningful results of the study:I. The empirical output of overall M & A performance(I) Overall performance of mergers and acquisition is definitely improved in the short term, whereas from the view of long range, mergers and acquisitions will not directly result in promoted efficiency of company.(II) As far as acquired company is concerned, performance grows dramatically in the year of M&A, and then followed by a decline even to the extent that reduction offsets the previous modification. So it is sagacious to reach the conclusion that M&A have no substantial bearings on the company's operating performance.(III) As far as the target company is concerned, performance will elevate gradually in the wake of a drop on the spot. M&A leads a positive role in efficiency.II. Analysis on affecting factors of merger and acquisitionAs to acquired company, the type of M&A significantly dictates company performance.Whether it is related party transactions or not is positively correlated with corporate performance; share proportion after merger and acquisition has an active relationship with corporate performance; there exists a positive relationship between ownership structure and corporate performance; transaction scale also has a striking positive impact on the performance of acquired company; The biggest shareholder's share proportion has a negative short-term impact on corporate performance. Ownership property of acquired company is notable related with performance for many times, but it exerts a positive short-term impact on performance and a long-term negative impact on performance.For the target company, share proportion of acquired company has a remarkable effect on performance of the target company; transaction scale has a striking negative impact on performance immediately and it is also true for a long time; ownership structure has a slightly positive effect on performance; Ownership property is negatively related with performance equipped with non-obvious parameter estimation.III Classified research over performance of company's merge and acquisition Classified research on the evolution of M&A performance clarifies:(I) Different types of M&A have different impact on performance. Horizontal merger will bring about a slight decline in performance in a short period, while the medium and long term performance undergoes an upward trend. Vertical merger induces a rapid breakdown in performance in the near future and a steady growth during the long-term process. Conglomerate merger witnesses a resounding success from a short-term prospective, but this tendency is not sustained in the long run.(II) Performance can be enhanced considerably owing to related party transactions after a short period of merger and acquisition, but it fails to evade a long-term descend. When we take the company without related party transactions into account, corporate performance remained constant. It experiences a little rise preceding a gradual drop later on.(III) Classified study of the proportion of tradable shares shows that the larger the proportion of tradable shares, the better the performance after the merger, and vice versa.(IV) High shareholding proportion provokes a brief performance increase, and then followed by a plunge. In harshly contrast with that, low shareholding proportion attests a downfall in performance after merger.(V) Classified study of ownership property manifests that M&A's performance of corporate shares is preferable to that of state-owned shares.Evolution of the target company's merger performance shows:(I) Higher shareholding level guarantees a stable upward trend of performance, and at the same time, lower proportion of shares held by acquired company after the merger will cause a slowly decrease in performance.(II) Transaction scale has everything to do with M&A's performance. As a consequence of larger scale, short-term influence appears more prominent and its resultant income skyrockets in the long run.
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