Research On The Relations Among Equity Liquidity,Merger And Acquisition And Enterprise Growth

At present,the national economic structure needs to be adjusted urgently,the comprehensive cost of various industries is rising,And the competition among enterprises is becoming more and more fierce,the merger and acquisition(M&A)of enterprises has become the primary choice to adapt to this change.After nearly 40 years of development,China’s capital market has formed a progressive multi-level structure at the institutional level,which provides an effective place for the diversified flow of enterprise property rights,and also provides a trading system for the smooth development of M&A activities.Especially after the reform of non-tradable shares,the liquidity of equity has been greatly improved,and the vitality of listed companies has been fully released.Many listed companies actively use innovative means to merge and reorganize.The form of acquisition has changed from simple non-tradable shares agreement transfer to secondary market bidding,tender offer,targeted issuance and stock swap merger.The form of asset restructuring has also evolved from pure asset purchase or sale has developed into a capital injection activity combined with directional issuance,which effectively improves the competitiveness and market operation efficiency.At the same time it opens the prelude of asset injection and overall listing of group companies.The number of mergers and acquisitions of enterprises in China’s capital market has risen sharply,the scale and value of mergers and acquisitions have repeatedly reached new heights.The transaction methods has been changing,and the number of industries involved in mergers and acquisitions has been increasing.Formally,the improvement of equity liquidity is the motivation of a large number of mergers and acquisitions of listed companies.However,the internal reason why listed companies are keen on mergers and acquisitions is the pursuit of high-speed growth.For Chinese enterprises,mergers and acquisitions have become an important way for enterprises to grow rapidly.Mergers and acquisitions have become an important strategic behavior of enterprises.The enterprise growth theory divides the main motivation of enterprise growth into exogenous factors and endogenous factors.The influence of equity liquidity on enterprise growth can also be carried out through both exogenous and endogenous mechanisms.From the perspective of exogenous growth theory,the improvement of equity liquidity makes M&A activities more frequent among enterprises.Based on theperspective of transaction cost of new institutional economics,M&A activity will promote the growth of enterprises,and equity liquidity will affect the growth of enterprises by influencing M&A behavior.However,the results of enterprise growth under the motivation of equity liquidity are different,and mergers and acquisitions may not necessarily promote the growth of enterprises.Therefore,this paper argues that under the analysis framework of equity liquidity--merger and acquisition--enterprise growth,the characteristics of merger and acquisition play an important intermediary role.The liquidity of equity will affect the decision in M&As,which makes the merger and acquisition activities present different characteristics,and the growth of enterprises under different characteristics of merger and acquisition will be very different.According to the theory of endogenous growth of enterprises,the growth of enterprises will be affected by the difference of organizational structure among enterprises,which distinguishes different individuals among enterprises and reflects the characteristics of enterprises.The internal governance structure of enterprises reflects the differences of organizational structure of enterprises.Different governance structures affect the merger and acquisition of enterprises,and also affect the growth of enterprises.Therefore,this paper argues that corporate governance plays an important post-moderating role in the analysis framework of equity liquidity--M&A characteristics--enterprise growth.In the setting of empirical variables,the independent variable uses Amihud illiquidity index to characterize equity liquidity,because Amihud illiquidity index includes various factors such as price and volume in equity transactions,which can more comprehensively measure liquidity.Dependent variables use total return on assets to characterize enterprise growth.This paper does not use Tobin Q value to characterize enterprise growth.The main reason is that Tobin Q value contains stock price information and may have a strong correlation with equity liquidity variables.Although total return on assets is less frequently used than Tobin Q value,it is also a better variable to characterize enterprise growth,so this paper finally makes use of Tobin Q value to characterize enterprise growth.Use the return on total assets to measure the growth of enterprises.This paper divides the characteristics of M&A into three categories: the first category is M&A type,including asset acquisition and equity acquisition;the second category is related transaction M&A,including associated M&A transactions and non-associated M&A transactions;the third category is M&A payment methods,including cash payments and equity payments.In order to avoid the impact of policy factors and the state-owned background on mergers and acquisitions,this paper selects the enterprises that have acquired M&A behavior in SME board listed companies from 2007 to 2016 as research samples.The sample that occurred after 2007 was selected because the share-trading reform in China was officially completed in 2006,after the reform of non tradable shares in equity has the same rights,full circulation,the more able to demonstrate the theme of this paper.There are two reasons for choosing SME board listed company.On the one hand,the M&A activities of China’s main board listed companies will be interfered by the policy factors and the institutional factors of the state-owned shares background.In the empirical process,the influence of policies and systems cannot be better controlled.The SME board listed companies are mostly private enterprises,and the M&A activity is less interfered by administrative factors,which can better verify the relationship between equity liquidity,corporate mergers and corporate growth.On the other hand,the number of Listed Companies in China’s SME board is enough.However,the number of listed companies on GEM is insufficient and the time of listing is short.Therefore,from the perspective of samples number and quality,sample from SME board is better.This paper uses Eviews12.0 and Excel2013 statistical analysis tool,combining qualitative analysis with quantitative analysis,to explore the main effects,mediating effects and mediating effects between equity liquidity,merger characteristics and corporate growth.This paper forms the following conclusions and perspectives:Firstly,the higher the liquidity of equity,the more likely it is for mergers and acquisitions,and the number of mergers and acquisitions per year is likely to increase.The increase in the liquidity of equity has led to a decline in the transaction costs of equity,and the equity is more likely to be realized and the concentration of equity is realized,but also makes more prone to mergers and acquisitions.For companies that are good at capital operation,it is more likely to conduct multi-frequency mergers and acquisitions.Secondly,the increase in equity liquidity has great influence on the M&A characteristics of different M&A companies.The liquidity of shares of acquiring company is higher,merger type easier for asset acquisition,payment easier for cash payment.But for target corporation,the target corporation is more likely through the completion of the acquisition.Thirdly,the improvement of equity liquidity has a significant role in promoting the growth of enterprises.Specifically,for acquisition companies,the improvement ofequity liquidity can promote the sustainable growth of enterprises,which can last until the third year after the completion of M&A.In the current context of overcapacity,the improvement of equity liquidity promotes the frequency of equity transactions,provides the possibility for mergers and acquisitions of enterprises,accelerates mergers and acquisitions in the industry,strengthens the competitiveness of existing enterprises in the industry,and promotes the growth of enterprises.Fourth,the acquisition company has different intermediary influences on the relationship between the characteristics of equity liquidity and the growth of the company based on the classification of its merger characteristics and the number of lag periods affecting the growth of the company.This paper finds that there are four intermediary effects for acquisition companies: equity liquidity-asset acquisition-enterprise growth in the current period of M&A;equity liquidity-cash payment-enterprise growth in the current period of M&A;equity liquidity-cash payment-enterprise growth lagging behind one period;equity liquidity-cash payment-enterprise growth lagging behind two periods.Fifth,for the acquisition of the company,the equity balance and the proportion of executive compensation have a significant regulatory effect on the intermediary role of the merger type;the proportion of independent directors and the proportion of executive compensation has a significant regulatory effect on the intermediary role of payment methods.In the process of equity liquidity – the type of mergers and acquisitions – in the current period of mergers and acquisitions,in the case of high equity balance,the intermediary role of mergers and acquisitions is stronger.In the process of equity liquidity – the type of merger(and payment method)– the growth of the company in the current period of mergers and acquisitions,in the case of a higher proportion of executive compensation,the intermediary role of the type of merger and payment and payment methods is stronger.In the case of equity liquidity – payment method – the growth of a company with a lag of 1 period and a lag of 2 periods,the intermediary role of the payment method will be weakened when the proportion of independent directors is large.