The Study On The Choices Of Targets And Economic Effect Of Foreign Capital M&A In China

Recently, as the leading pattern of foreign direct investment (FDI) in the world, foreign capital M&A in China are developing rapidly. This form of cross-border direct investment, which is unlike traditional Greenfield pattern, will have different effect on every layer of economy in China. How to judge the influence of foreign capital M&A objectively, utilize its positive effect sufficiently, and avert the risk it brings, deserve thoroughly investigation. Considering the situation of foreign capital M&A in China, we focus on the characteristics of targets in these transactions taken by the foreign investors, and based on the characteristics, we analyze the diversified influences on the economy comprehensively. Furthermore, we advance some strategies for both the principal parts in micro economy and supervisors in macro economy.In order to study the characteristics of the targets in the foreign capital M&A, international and domestic motivations are thoroughly investigated. At the meantime, the unique investment environments are mentioned as the special reason for the foreign capital M&A in China for the first time. In this paper, the rapid economy development, the improving economic and institutional environments are regarded as the essential motivations of foreign capital M&A in China.The targets of the foreign capital M&A aimed at the revenue from the rapid development of economy in China, have distinct non-financial and financial characteristics. With regard to non-financial characteristics, we conclude that our government has the key guiding influence on the foreign capital M&A in China. The distributing of time, areas, and industry as well as the features of the equity have tight relationship with the economic tactic set by the government. Before the equity division reform, most of the foreign capital M&A targeted on listed companies in China carries out the transactions through transferring the non-circulation stock, and the prices of the mergers are on the high side. Concerning the financial characteristics of the targets, we initially apply the well-know ANOVA and Logit model in empirical research of foreign capital M&A. The conclusions are as follows: generally speaking, the targets of the foreign capital M&A in China have favorable management efficiency, larger share of the market and industry influence, relatively concentrated stock equity, weak growth capability, and strong financial ability of expansion.After analyzing the motivations of foreign capital M&A and identification of the target characteristics, we discuss the economic effect from the perspective of microeconomic stock market, the development of industry as well as the economic growth and economic fluctuation. In the first place, during the empirical analysis, we creatively adopt the event study to investigate the microeconomic influence on stock market in different industry and with diversified control power through testing the abnormal return brought by foreign capital M&A . In the second place, initiatively regarding industry as an independent gradation, this paper discusses the influences of foreign capital M&A on the development of industry from three aspects. Firstly, foreign capital M&A has positive and negative influence on industrial structure; secondly, foreign capital M&A increase the risk of monopoly in the market; thirdly, foreign capital M&A dialectically influence the establishment of our independent brands. In the third place, different from the existing relatively separate and disordered analysis in the field of macroeconomic influence caused by foreign capital M&A, this paper follows the outlines of long-run economic growth and short-run economic fluctuation, through the four macroeconomic markets, confirms the positive effect of mergers on the economic growth, and also notifies the intensified effect caused to economic fluctuation in China.Finally, this paper put forward some pertinent suggestions in different aspects of economy in reply to the effect brought by the foreign capital M&A. In the aspect of microeconomic stock market, we point out that lay down the perfect market mechanism is the optical selection to reduce the negative impact, because only the mature capital market could afford large scale foreign capital M&A. In the aspect of the development of industry, we point out that we are supposed to utilize foreign capital M&A to promote the coordinative development of the three gradation industry, and also construct industrial security management system to alleviate all types of risks which are triggered by foreign capital M&A. In the aspect of macroeconomic areas, the optical strategy is to make full use of foreign capital M&A to promote the long-run economic growth and smooth the short-run economic fluctuation in China.