Government Intervention, Insider Control And Enterprises’ Diversified M&A

In the economic transition period, the government’s "super" control over the administration and the "super weak" control over the property rights, lead to state-owned listing enterprises have the double governance characteristics of government intervention as well as insider control. Government and insiders control enterprises’ key resources, which make them have the ability to carry out their economic, social and individual income aims in the process of enterprises’ Diversified mergers and acquisitions. As a reslut, M&A should undertake tasks of performing country’s economy, social function and maximization insiders’ individual income. State-owned listing enterprises have some typical characteristics, and final transmite to the M&A performance, which leading to different economic consequences. Thus, based on the economic transition background, this paper studys the impact of government intervention and insider control to Diversified M&A.After summarizing the relevant literature, This paper put forwards four major theoretical basis for the impact of government intervention and insider control to Diversified M&A. At the same time, combined with the reality of the situation closely, it analyzes the system background of government intervention and insider control’s influence to diversified M&A. Then, from the perspective of normative and empirical analysis, this paper uses the methods of intermediary effect analysis, logistic regression, multiple linear regression, event study, factor analysis, independent sample test, paired sample test, etc, to examine the influence.Research results show:(1) Government intervention improves the possibility of state-owned listing enterprises’ related diversification M&A, while the insider control increases the possibility of unrelated diversification M&A. In this process, key resources play an important part of the intermediary role.(2) State-owned listing enterprises’ diversified M&A shows obvious object-choice characteristics of industry preference, related party transaction preference and regional preference. Government intervention can significantly increase these three kinds of preference. The insider control could only increase the degree of industry preference and the related party transactions preference, while the impact to the same region preference is not significant. Further more, this paper distinguishes the ultimate controller of the listied enterprises, finding different targets and different control strategies of central and local government make central state-owned listing enterprises express different preferences from local state-owned listing enterprises.(3) Diversified M&A destroy enterprises’ value in the short term, but have no obvious influence for long-term M&A performance. Government intervention, insider control, M&A type and M&A preference will have impacts on M&A performance. Government intervention improves the performance, while the insider control would reduce the performance. Unrelated diversification M&A will seriously damage enterprises’ performance, while the performance of related diversification is relatively good. Industry preference can increase the long and short term performance. Related party transaction preference can reduce the performance in the short term, but the negative effect is not obvious in the long term. The same region preference can also improve the performance, but this effect is mainly reflected in the local state-owned listing enterprises, which has no significant effect on the central state-owned listing enterprises. In the end of this paper, it puts forward the relevant suggestions to reduce the government and insider to interfere in the M&A, as well as some advice to regulate M&A activities.This paper includes government intervention and insider control in the study framework of diversified M&A, which would extend the existed analysis framework of enterprises’ M&A behavior based on the firm theory and financial theory. It is helpful to expand government intervention theory, insider control theory as well as enterprise merger and acquisition theory, which can also provide certain basis for promote the healthy development of China’s capital market.