Study Of The Stock-for-stock M&A Among Listed Companies In China

Merger and acquisition is a major decision for the corporate. With the advancement of the globalization and the liberalization of financial service trade, the stock-for-stock M&A is becoming more and more popular. In the fifth wave of merger and acquisition, stock-for-stock M&A accounts for73%in the U.S. and67%in the Japan. Out of the2003top-10merger and acquisition case in the world, eight has been conducted in the form of stock-for-stock M&A. Now the stock-for-stock M&A has been the main mode in the western merger and acquisition market. Not only in the western country, the merger and acquisition activities is becoming more and more active in the Asian market with the scale becoming increasingly large,. When the traditional mode of merger and acquisition cannot meet the needs of the corporate, stock-for-stock M&A is widely accepted in the Asian market.On the one hand, though stock-for-stock M&A has not occupied the leading position in China, compared with the cash merger the stock-for-stock M&A can save the cash flow, enrich the payment medium, reasonably avoid tax, lower down the debt ratio and enhance the anti-risk ability. With the completion of non-tradable shares reform, the valuation problem in the stock-for-stock M&A has been solved. On the other hand, Chinese stock market has a short history, let alone the stock-for-stock M&A with the first case14years ago. Up to May2013.only50companies conducted stock-for-stock M&A. According to the development path of merger and acquisition in the world capital market, we can reasonably predict that stock-for-stock M&A will play a larger role and become the major form in the Chinese merger and acquisition market. But there is still some problem to be solved such as the underperformance and unreason ability of the merger plan, it’s necessary to make some systematic study on the stock-for-stock M&A, which is of great theoretical and practical importance.This dissertation aims to conduct a thorough research into the stock-for-stock mergers and acquisitions that happened in Chinese capital market. From four levels (theory, strategy, practical operation and performance) this article unfold the7chapters, each covers one important aspect of the stock-for-stock M&As.In the first chapter, some fundamental concepts and critical theoretical models are reviewed and refined. The main topic of this chapter is to illustrate the significant meaning stock-for-stock M&As are to the whole capital market. After that this dissertation made a quick look-thorough over the current research papers and a quick comment on the stock-for-stock M&As’ procedures. The second chapter focuses mainly on the corporate governance issues. Beginning from studying the relationship between corporate governance and M&As, this chapter investigates how corporate governance mechanisms affect the company performance. In addition to that, this chapter analyzes the impact from stock-for-stock M&As. Within the operational level, this dissertation studies the M&A law, valuation methods and accounting methods in the3rd,4th and5th chapter respectively.In the3rd chapter, some important M&A law topics are covered. By comparing the laws in the U.S., U.K., and the E.U., reviewing the history of M&A law and summarizing the experience of establishing law clauses, this chapter made a comprehensive study of the law-related topics of stock-for-stock M&As. In the end, the article briefly looks into the current-existing Chinese laws and made some suggestion. The forth chapter mainly studies the valuation methods and the determination of the stock exchange rate. Because the stock exchange rate is based on the proper valuation of each firm, the common valuation methods are firstly introduced and reviewed, including the free cash flow method, economic value added method and comparable multiplier method. On the basis of correct valuation, some stock exchange rate determination methods are being commented, including the EPS method, market capitalization method, book value per share method. Through the case studies, the chapter investigates the how different details can affect the stock exchange rate and summarizes some point and guide lines for future stock-for-stock M&As.In the5th chapter, important accounting and financial information disclosure issues are being studied. Based on the EMH, this chapter firstly discusses the importance of financial information disclosure to investors, the company and the capital market. By introducing the international accounting principles, the GAAP and the accounting principle system in China, this chapter made a deep research into the differences that lie within those systems. In the end this chapter comes up with the conclusion that a more transparent financial disclosure will help to enhance the resources allocation efficiency of the whole society.The part four focuses on the performance of stock-for-stock M&A, including chapter6and7. In chapter6, we introduce2successful cases, named Weichai Power and Bluefocus respectively. The mergers’background, motivation and concrete methods are analyzed, as well as the performance of merge. They offer excellent examples for the stock-for-stock M&A in domestic. Chapter7is the empirical studies which take the advantage of event study and financial index correlation method to test the market reaction to the stock-for-stock M&A. Our sample is consisted of384mergers and the describe analysis shows the main mode of stock-for-stock M&A is the listed firm merge the unlisted firm. The AR and CAR show that the merge can significantly increase the wealth of merger, which is consistent with the existed studies in China. Finally, some suggestions are forwarded, including improving the related law, monitoring the inside trade, strengthening the corporate governance and information publication.The innovations of this doctoral dissertation are as follows,Firstly, a systematic analysis and study of the stock-for-stock M&A, which is quite a shortage in domestic motivates this dissertation.Secondly, a sufficient research to the law problem with respect to the stock-for-stock M&A is being studied. The comparisons between Western Countries and domestic can show light on the law improvement in China.Thirdly, a comprehensive analysis and conclusion to the successful stock-for-stock M&As which can offer some important experience for the similar mergers.Fourthly, the newly data ranges from1998to2013, including384mergers in our sample, to get more persuadable and sound conclusions.