The Research On The Fixed Cost And The Chinese Enterprises' Cross-border Mergers And Acquisitions

Since the 1980 s,with the fifth worldwide wave of mergers and acquisitions(M&A),Chinese enterprises have entered a period of rapid development in 2008,after the period of start preparing and steady development.For geographical distribution,it shows that the host country are mainly distributed in Asia,Europe and South America(in Europe,North America after excluding tax havens),the location characteristics of the host country as tax havens,the United States,Australia,Germany and other developed countries.For industry distribution,it shows that sponsors are mainly financial and manufacturing industry,and that M&A is mainly with manufacturing for developed countries,and mainly with resources industry for developing countries.With the rapid development of cross-border M&A in China,domestic and foreign scholars research on the theory of cross-border M&A is gradually deepen,explaining the location and performance of cross-border M&A from the perspective of resources,market,exchange rate,culture and so on.But there is few literature analyze cross-border M&A from the fixed cost perspective.As the core concept of enterprise heterogeneity theory,the calculation and application of fixed cost has important theoretical and practical significance.This paper treates the fixed costs as main variables to the study of cross-border M&A,builts the theory model with the fixed cost and the institutional quality,and estimates the fixed costs of Chinese enterprises cross-border M&A,and uses the estimated the fixed costs to explain the location choice of Chinese corporates' cross-border M&A in intensive marginal,extension marginal,short-term performance and long-term performance.Specifically,the main contents and the main conclusions of this paper are:Firstly,this paper conducts a theoretical analysis.Based on Helpman,Melitz and Yeaple(2004),this paper introduces fixed cost and institutional quality to enterprise heterogeneity theory by productivity function,and explores the influence of fixed cost and institutional quality to the location and performance of cross-border M&A through the binary choice of export and cross-border M&A.As the conclusion of the theoretical analysis,the location selection of cross-border M&A depends on the fixed cost and the quality of the host country.Doing the cross-border M&A,enterprises will choose the host countries with lower fixed costs,rather than ones with higher fixed costs,and the lower fixed costs of host country,the larger number of cross-border M&A.For performance of cross-border M&A,fixed costs also generate negative effects.Based on theoretical analysis,this paper calculates the fixed cost of cross-border M&A of Chinese enterprises.Firstly,we determine the regression with the deal value as the explained variable,the markets of host country,natural resources of host country,exchange rate and national distance as explained variable.Secondly,the coefficient of institutional quality,time,and industry fixed effect of the regression equation is estimated using 674 observations,and it is used to show that no changed party in institutional quality,time and industry in cross-border M&A transactions.Thirdly,the fixed cost is calculated based on the fixed effect coefficient and operation formula.By measuring,this paper argues that the higher fixed costs appeared in middle institutional quality,the low institutional quality with low fixed costs,when institutional quality high fixed cost stable medium.And fixed costs of manufacturing,services,wholesale and retail are generally lower,fixed costs of oil and gas industry are generally high.And then,this paper does four robustness testes: reducing the number of fixed effects,we prove the rationality of the introduction of three fixed effects;reducing the control variables,we prove the effectiveness of the use of four explanatory variables;reducing the control variables and measuring fixed cost respectively,we prove there is no significant difference;we also prove the validity of aggregation number of fixed effect.After estimating the fixed cost,this paper explores the influence of fixed cost on the location choice of Chinese enterprises cross-border M&A through the view of extensive margin and intensive margin,based on the 84 host country in 2001-2016 as the research sample.This paper finds that the fixed cost of cross-border M&A is negatively correlated with extensive margin and intensive margin,it's that the fixed cost is not conducive to the expansion of the number of mergers and acquisitions in the host country(expansive margin),and that it is also not conducive to the increase of the number of cross-border M&A transactions(intensive margin).We also find that the negative effect between fixed cost of cross-border M&A and dual margin of location choose exists in the host country for the sample of developed countries,but not significant for the samples of developing countries.The paper also studies the effect of fixed cost on the performance of both short-term performance and long-term performance with the sample of 108 Chinese public companies' transactions,based on measuring short-term performance using the method of event and the accumulated excess return of window period,measuring long-term performance using financial difference between the first and previous year,and the second and previous year of five financial indexes,such as sale cash ratio and financial turnover.This paper finds that the overall impact is negative,it's said that fixed cost weakens short-term performance and long-term performance of cross-border M&A.For the short-term performance,this negative effect does not influenced by changing control variables,horizontal mergers,and whether APEC countries' sample,but there are no significant negative effect for the subsample of OECD countries as host country and for that of state-owned enterprises.For long-term performance,fixed cost negatively influences the ratio of balance sheet and cash flow statement,such as sales cash ratio,operating cash flows per share and asset turnover,and positively influence the ratio of income statement,such as income growth rate and net profit growth rate.The innovation of this paper and its contribution to the existing research are mainly reflected in the following aspects:Firstly,this paper combines the fixed cost with the cross-border M&A of the enterprise for the first time,puts forward the concept of fixed cost of cross-border M&A creatively,and uses it to study the cross-border M&A of Chinese enterprises.The existing research on fixed costs is focused on the export field,and uses the fixed export costs to study export.However,there is little literature on the fixed cost of cross-border M&A,and there is no literature to study the impact of fixed costs on the location and performance of cross-border M&A.Based on the study of fixed cost and cross-border M&A,this paper not only expands the theoretical application of fixed cost,but also enriches the research scope of cross-border influencing factors,which has important theoretical contribution.Secondly,in the measurement of the fixed cost,this paper uses the fixed effect coefficient which is usually used in the field of corporate research measure the fixed cost for the first time.The existing research limited to the calculation method of fixed cost research,is limited to theoretical research,and few literature involves fixed cost calculation.In the field of corporate research,a common method is to use the fixed effect coefficient of the regression equation to express a fixed part that does not vary with a certain factor.This paper uses this method to calculate the fixed cost,and it has some innovation in the application of the empirical method.Thirdly,this paper puts the institutional quality into the calculation of fixed cost,which is more innovative in the research perspective.A small number of studies have studied the source of fixed costs from the perspective of time,industry and country,and have not yet studied the quality of the host institution into the analysis of fixed costs.In the cross-border mergers and acquisitions,the host institutional quality will have a significant impact on the host market entrance and cause fixed costs.Therefore,this paper concludes the institutional quality into the fixed cost,enriching the connotation of the fixed cost.Fourthly,in the theoretical analysis,this paper creatively introduces the institutional quality and the fixed cost into the enterprise heterogeneity theory through the productivity function.In the traditional theory of enterprise heterogeneity,productivity is seen as exogenous given,with the deepening of research,domestic and foreign scholars gradually relaxed the hypothesis of productivity exogenous.Based on the existing research,this paper regards productivity as an endogenous variable,which is considered to be affected by factors such as fixed cost and institutional quality,and analyses the influence of fixed cost on the location and performance of cross-border M&A.So this paper is innovative in the construction and analysis of theoretical model.