Research On Industrial Linkage Of Chinese Listed Companies And M&A Performance

With the rapid development of China's capital market,Merger and Acquisition(M&A)have gradually been a mainstream mode of capital operation,and some successful M&A cases have emerged.However,some unregulated M&A behaviors in recent years have brought potential harm to future development of enterprises,damaged legitimate interests of minority shareholders and become a great challenge to regulatory authorities.On the basis of a comprehensive review of existing literature,this article makes indepth exploration on two issues: One is whether M&A creates value for enterprises,the other is how to create better value by choosing adequate M&A targets.Both theoretical and empirical analysis focus on the two key issues.This article studies the first issue from the view of the entire enterprise and its shareholders respectively,with the indicators of comprehensive financial performance and economic value added.M&A should not only induce better performance for enterprises,but also create value for shareholders.Given the external conditions,the two objectives should be consistent in theory.However,conclusions of existing literature for the former proposition are not consistent,while research on the latter proposition is limited.This article is aimed at filling this gap with thorough research,which has both theoretical and practical significance.In addition,according to the theory of internalization,it is easier to realize integration of resources by selecting target company with closer linkage to the acquiring company.This might lead to better result after the deal.However,studies on the impact of corporate linkage on M&A result are so limited with diversified conclusions.As a matter of fact,there is even no uniform and persuasive indicator for the concept of linkage between both parties of M&A,which may be the main reason for the inconsistency of research conclusions.Fromthis point of view,this paper assumes that the linkage of production is essential for integration and key to effect of economies of scale.On the basis of input-output approach,we construct the innovated notion of industrial linkage between merging companies,and set it as one of the key variables in subsequent empirical research.Next,we make an empirical study on whether M&A achieves the above two objectives.We construct a performance measurement index based on factor analysis,and pointed out through empirical analysis that M&A itself could not bring about improvement of corporate financial performance.Meanwhile,we study the relationship between industrial linkage and M&A performance.The results show that neither the selection of target enterprises from the same trade/industry nor the adoption of horizontal/vertical/mixed mode has significant influence on corporate financial performance.It is the choice of a target company with high industrial linkage that brings about the improvement of corporate performance.This result proves that our theoretical hypothesis is reasonable.We also introduce the concepts of opportunity cost and economic added value(EVA).In view of the controversy on the calculation of EVA,we give suggestions on processing method in line with the purpose of research.Empirical result show that M&A can not bring value to shareholders,either.Besides,industrial linkage fail to have a positive impact on the improvement of EVA.We also try to discuss this result and pointed out that disregard for the rights and interests of retail investors in China's capital market may be the direct reason of the result.Finally,we put forward the corresponding policy suggestions in view of the conclusions.We also bring about future research prospect on the basis of innovation and deficiency of this article.