A Study On The Motive And Performance Of Mergers And Acquisitions By China's Listed Companies

Against the background of diversified institutions of China's listed companies andbased on the current research conducted by Chinese researchers,this dissertation aimsto do a more comprehensive study on the motive and performance of mergers andacquisitions (M&As) by listed companies in China.By reviewing the course ofdevelopment of China's listed companies as well as the securities market,thisdissertation sorts out the basic governance characteristics of the state-owned holdinglisted companies and private listed companies.While the former exhibits dualgovernance characteristics of "government intervention" and "insider control",thelatter embodies the basic features of "large shareholder control".Based on governance mechanisms of different types of listed companies,thisdissertation makes a theoretical analysis of the impact of "government intervention"and "majority shareholder control" on the company's M&As,puts forward "tunneling"and "propping" as the M&A motives for China's listed companies,and proposeshypotheses for the performance differences of M&As by varied listed companies.With the 613 samples of China's listed companies acquiring non-listed companiesduring 1999 through 2004,this dissertation employs the methods of "event study" and"financial ratio (ROE)" to carry out an empirical study on the performance of M&Asof the listed companies and test the proposed hypotheses.The results show that thepre-acquisition annual financial results of the listed companies and the acquisitionperformance is negatively relative,which is in favor of the M & A motives hypothesisfor China's listed companies' "tunneling" and "propping".In addition,in the shortterm,the M&A performance of the state-owned holding listed companies is betterthan that of private listed companies,the M&A performance of the centralgovernment controlling listed companies is better than that of local governmentscontrolling listed companies,but in the long term,M&As fail to improve thecompany's financial performance.Through the analysis of the single factor and multiple regression of the cumulativeabnormal return (CAR) in the event of company's M&A,this paper also finds that China's securities market apparently reacts before the listed companies' M&A,meanwhile,the acquiring company's cumulative excess return has a significantpositive correlation with the scale of M&A transactions.In addition,investors respondmore positively to the listed companies' diversified acquisition,which reflects theinvestors' speculation in China's capital market over the events of M&A.