An Empirical Study On The Relation Between Transaction Characteristics, Cultural Differences And The Performance Of Equity Mergers

In recent years, equity mergers have become the main type of mergers. The transactions of equity mergers have been keeping a steady level of1000merging cases per year, and180billion per year. How should we look at such large-scale equity mergers? Are they the games of capital operations or really creation of profits? If they can create profits, what are the determining factors? In merging cases, what games are the purchasing side and the target enterprise playing? How to play the game? Do cultural differences influence the performance of mergers? In present studies, these problems have not been answered systematically. There are not many literatures from the perspective of cultural differences. What’s more, there are phenomena of blind merging expansions among many enterprises and negligence of investigation of cultural differences and integration of different cultures. All of these questions should be further studied in a systematical manner.Aiming at these questions, the author will separate equity mergers from the complicated miscellaneous mergers, analyze stock-holding ratio and other inclusive characteristics and their influences on merging performance, probe into problems like how to reinterpret the nature of mergers, determining factors, mechanism, cost-profit gaming from the perspective of constructing the basic theories of equity merging, and therefore provide some theoretical guidances decision-making references for the enterprises and related supervising authorities. This study is of considerable significance, for it constructs and testifies the TFTCD model for equity mergers and reveals that transaction characteristics and cultural differences are the two main factors determining merging performance, and it puts forward the FSV three-level enterprise culture theory, among which the strategic level of culture and values regulating level of culture constitutes the nuclear culture of an enterprise. This study is of considerable guidances and references for the merging practice. Listed companies should pay attention to cultural investigation and choose the suitable target company in advance. Supervising authorities should make quantitative evaluation of merging qualities and motives, and reduce the system risk on the stock market and increase the efficiency of the capital market through recognizing and controlling credibility, creativity and other cultural differences in merging cases.This thesis unfolds on the basis of the above ideas, puts forward the assumption of the theoretical models and testify them. The thesis is divided into seven chapters. Chapter one is about introductions. In this chapter, the author introduces the thesis briefly, including the defining of the research objects, research motives, theoretical and practical significances, main contents of the thesis, and originality of the thesis. Chapter two is about literature review. The author deals with the literatures about theories of merging performance, transaction characteristics and cultural characteristics and their influences on merging performance, provide an overview of present researches, and points out the space for further research. Chapter three is about the theoretical framework, and this thesis is mainly based on agency theory, FSV enterprise culture theory, and and economic theory of transaction costs. In chapter four, the author deduces and constructs TFTCD model of "transaction characteristics and cultural differences determining merging performance", on the basis of game theory and profit-optimizing model and forms the theoretical mechanism that cultural differences influence the accounting performance and transaction characteristics influence the market performance, and the prior factor and the concurrent factor interact with each other and influence the accounting performance of merging. In the deducing process of game theory and profit optimizing, the author discovers that the game of equity mergers revolves around paying prices and the expectation for super-normal market performance is the function of paying prices. Chapter five is about clinical research method. Basing on the fact that financial industry is excluded from quantitive research. The author studies the merging case"China Pingan merges Shenzhen Development Bank" and testifies the TFTCD model. Chapter six is about empirical studies. By case studying "China Pingan merges Shenzhen Development Bank", and sampling the1824merging cases between2008and2010, the author tests the influencing ways of the two factors in TFTCD and forms the research system of combining the universality and individuality in chapter six. Chapter seven is about research conclusions and policy suggestions. In this chapter, from the perspective of renewing the understanding of the essence of merging, the author puts forward some policy suggestions about strengthening cultural investigations before merging. The author also points out the limits of this research and the space for further research.The main conclusions of the thesis can be summarized as follow. One, equity mergers can be an essential part of enterprise strategy. The overall performance of equity mergers include not only short-term market performance, long-term market performance, but also long-term accounting performance. The evaluation of merging performance should be focused on the strategic objectives of an enterprise. Two, the transaction characteristics and cultural differences of equity mergers are the main two factors determining the performance of enterprise mergers. Transaction characteristics mainly include equity characteristics(stock-holding shares of the leading stock-holders), paying prices and ways of paying, and scale ratio of the acquirer and target company. Cultural differences mainly include complementation of strategic resources and values administration. Complementation of strategic resources consists of four sub-factors, namely, same ascription, same control, industry relevance, and enterprise nature. Values administration consists of cultural intensity, difference of creativity, and difference of credibility. Three, Cultural differences and transaction characteristics influence the performance of mergers in different ways. Cultural differences are the prior-the-event factor, which exerts its influence through internal transaction cost after the merger and influences the performance of merger in the long run. Transaction characteristics are the during-the-event factor, which are the most important factor to stimulate the reactions of the capital market. At the same time, transaction characteristics can also amend the influence of cultural differences on the accounting performance. The prior-the-event factor and the during-the-event factor influence the accounting performance of after the merging. Four, correlation testing and empirical analysis both find out that the enterprises with a good reputation achieve a better performance in equity mergers than those with an ordinary or a worse reputation.The originality of the thesis lies in three aspects. One, the author puts forward and tests the two-factor theoretical model(TFTCD) for the performance of equity mergers. Basing on agency theory, FSV culture theory, and transaction cost theory, the author applies the notion of cost and profit, constructs the profit function of equity mergers, goes through the gaming of the prior-the-event stage, the during-the-event stage and the after-the-event stage, and deduces and establishes the TFTCD model. This model reveals that the main factors determining the performance of equity mergers include not only the transaction characteristics, but also cultural differences, which is rarely involved in previous studies. To test this theoretical model, the author does case studies and empirical testing. The analysis testifies the TFTCD model, and provides a new decision-making model for the interested parties. Two, the thesis puts forward the FSV enterprise culture system, and divides the enterprise culture into three levels, and substantiates the relations among them. According to Maslow’s hierarchy of needs, the author divides culture into Financial Level, Strategy Level and the Value Level. Financial Level of enterprise culture is the superficial culture and the culture of the Strategy Level and the Value Level are the nuclear culture of the enterprise. The author puts emphasis on the nuclear culture from the perspective of cultural differences. Three, the author analyzes the nature of merging from the strategic level and does case studies. Equity mergers are not only capital operation, but also strategic moves. Take "China Pingan merging Shenzhen Development Bank" for an instance,. From the perspective of strategy, the author points out that the merger was not started in2009. The author analyzes and reveals that "China Pingan merging Shenzhen Development Bank" is actually a succession of plotting events, which eventually led to Pingan Bank’s being listed, the integrating of the quality resources in the banking industry, the finishing of its strategic layout, and the fulfilling of its strategy.