Research On Corporate Governance Of Merger And Acquisition In Chinese Listed Companies

Company merges and acquisitions(M&A)is an important form of corporate controlling rights transfer and property trading,but plays a part in enterprise development.Corporate governance is mainly focused on designing organization structures,systems and mechanism to solve conflict of stakeholders.For a long time,many scholars have delved the relationship between M&A and corporate governance and find contradictory results.Specifically,some studies show that M&A improve the corporate governance benignly while others exhibit the opposite results.On the phase of the market economy in transition period,China is undergoing severe problems of internal control and excessive concentration of equity.Moreover,the legal system and the enforcement capacity of supervision department still need to improve.Under the circumstances,M&A of listed companies has changed into a featured channel of grabbing the illegitimate interest.Frequently involved with too low equity transfer price,misappropriated funds,price manipulation and insider trading problems,M&A gradually losses public confidence in its role of improving corporate governance.In view of the above situation,we conduct a research on the influences of M&A to corporate governance,as well as the mechanism of insider trading and misappropriation problems happen in M&A.In order to assess the influence of M&A to corporate governance,we choose a series of proxies consist of ownership structure,shareholder rights,board of directors,board of supervisors and senior management structure and operation mechanism,corporate executives,personal circumstances,corporate remuneration and incentive system,information disclosure and stakeholder to establish an appraisal system for corporate governance.Specifically,we adopt the factor analysis method to analyze the relative data of listed companies from 1999 to 2012.According to our research,before the merger,the target company's corporate governance levels were significantly lower than the level of companies without M&A.This suggests that mergers and acquisitions generally occur in companies of poor corporate governance.The lower the corporate governance level is,the more probability to become a merger target.Improving corporate governance through equity transfer works as one of the main motives of M&A;2)After the merger,the merger initiator and the target company's corporate governance performance are both significantly improved while the target company's corporate governance level is still lower than the acquired company's corporate governance.This suggests that mergers and acquisitions can significantly improve the level of corporate governance,shareholders and managers can effectively alleviate the principal-agent conflicts.Through mergers and acquisitions,the company's various stakeholders in the conflict have been effectively resolved,and the target company's various stakeholders in the conflict although eased,but have not been effectively resolved.Therefore,the target company's corporate governance is always lower than non-M&A business and corporate mergers and acquisitions;3)before the occurrence of mergers and acquisitions in the sample 1 year(T-1 period)to the first two years after the occurrence of(T+2 period)during the M&A business and target enterprises,non-merger corporate governance level grows slowly.To study the controlling shareholders Entrenchment problem in M&A,we elaborated the cases to conclude four main channels of Entrenchment and analyze the influences of Entrenchment to listed companies.In LLSV model featuring Entrenchment problem,we discuss the system element and non-system element influencing controlling shareholders and adopt game theory to further analyze the relationship between stakeholders in M&A.According to the analysis,the controlling shareholder of both companies in a merger may take non-collusive and collusive manner to encroach interests of minority shareholders.When the controlling shareholders take non-collusive way to encroach interests of minority shareholders,the target company's controlling shareholder transact the controlling rights on a premium to obtain private interests.The controlling shareholders in M&A expand their control at the expense of the interests of minority shareholders,with the premium obtained by the target company's equity,resulting in an equity transfer price higher than the price of tradable shares.When the controlling shareholders collusively appropriate the interests of minority shareholders,they depress equity transfer price and use tradable prices far below the equity transfer price to seek private benefits of control purposes.In the game of between controlling shareholders of M&A initiator,the lower the proportion of the equity transfer,the higher the equity transfer price.In the game between controlling shareholders and minority shareholders and the market regulators,controlling shareholder assess the probability of Entrenchment investigation to maximize interests.Faced with the Entrenchment of the controlling shareholder,small shareholders would prefer to vote with their feet,rather than take direct supervision in order to reduce costs.In addition,to improve regulatory efficiency,the market regulator needs to consider the behavior of the controlling shareholder occupation probability,the extent of injury,and find out the cost of seizure behavior,create a favorable market environment.In order to verify the obtained theory,the paper selected data of 231 target companies where M&A occurs from 1999 to 2012 as well as 636 companies without M&A as a reference.Empirical results show that M&A of listed companies have higher price discounts and the equity transfer price is significantly higher in M&A.The empirical results also show that both companies on mergers and acquisitions,the company acquired the lower the proportion of the equity transfer,the higher the equity transfer price.However,for non-acquisition businesses,the lower the proportion of the equity transfers,the lower the equity transfer price.The empirical results support the theoretical results according to game theory analysis.To study insider trading problems in M&A,we first introduce the situation and typical cases of insider trading problems in M&A and summarize the features of insider trading.After then,we analyze the causes and influences of insider trading in the perspective of system and economics.Moreover,we further adopt the event study method to analyze the existence,severance and influencing factors of insider trading.Based on the above research,we raise the countermeasures and suggestions to improve the corporation governance of listed companies in M&A.We first introduce the foreign laws and regulations concerning protecting non-controlling shareholders in M&A and regulatory measures on insider trading.Then we put forward the methods of relieve the controlling shareholders Entrenchment problems,namely,managing connected transaction,improving the role of institutional investors and establishing protecting mechanism for non-controlling shareholders.Concerning controlling insider trading,we insist on improving the mechanism of information disclosure,enhancing the regulatory measures and clarifying the civil liability for insider trading.Our research has theoretically and empirically enriched the domestic research in this area and brought strong evidence of protecting interests of small investors.