The Impact Of Non-state-owned Shareholders' Participation In Governance On State-owned Enterprises' M&A Performance

Making mergers and acquisitions(M&A)is an important approach for state-owned enterprises(SOEs)to achieve strategic goals such as increasing capital accumulation rate,divesting backward production capacity,and optimizing capital structure.The efficiency and effect of M&A are reflected in its performance.Under the current policy of making state-owned capital "stronger better and bigger",elevating the ability of controlling large capital and improving the efficiency and effectiveness of M&A has become the key factor to achieve leap-forward development for SOEs.Compared with state-owned shareholders,the non-state-owned(NSO)shareholders have a single interest goal and pay more attention to the economic benefits.Making NSO shareholders participate in SOEs' governance activities and play the role of supervision and balance,may become an important way to improve M&A performance.This paper focuses on three core issues:the effect of NSO shareholders' governance on SOEs' M&A performance,the influence path,and the variance in different situations.First of all,this paper explores the effect of NSO shareholders' governance on the SOEs'M&A performance from the perspective of equity balance and appointment of directors.On the one hand,under the modern enterprise system,NSO shareholders can express their interest demands through the decision-making mechanism of the shareholders' general meeting and play the governance role in the way of equity balance.The general meeting of shareholders is the highest authority of an enterprise.All the differences of opinions among stakeholders should be resolved through voting mechanism.When the government intervenes in the decision-making of M&A as the actual controller,sacrificing economic efficiency in exchange for political achievements,the NSO shareholders can dissent in the voting,increasing the cost of government intervention.At the same time,the higher the shareholding ratio compared with the actual controller,the stronger the influence of NSO shareholders in corporate governance and business decision-making,which is conducive to alleviating the internal control problem caused by the "absence of owners" of state-owned shareholders,restraining the self-interest behavior of executives in the process of M&A,and improving the final performance.On the other hand,appointing directors is conducive to NSO shareholders' role of governance,so as to weaken the impact of non-economic factors on M&A,and improve the SOEs' M&A performance.Obtaining sufficient discourse power is the prerequisite for NSO shareholders exerting governance effects.However,holding equity does not always guarantee the NSO shareholders having substantial influence.If NSO shareholders only have a small portion of equity,it is difficult to participate in the business decision-making process by voting at the shareholders' meeting.At this time,protecting the "voice" of NSO shareholders by appointing directors will be conducive to the improvement of M&A performance.Secondly,based on the perspective of M&A behavior process,this paper explores the influence path of NSO shareholders' governance on M&A performance from two aspects of target selection and integration.M&A activity is a complex behavioral process involving multiple management links and issues.M&A performance mainly reflects the economic consequences of M&A activities.Former researches show that government intervention and self-interest behavior of executives will distort the M&A objective selection of SOEs,which means more M&A transactions doing with enterprises in non-related industries.At the same time,it is easy to cause managerial slack and failure in M&A integration,which will finally impair the M&A performance.NSO shareholders participate in corporate governance by balancing the power of the actual controller and appointing directors to participate in board governance may relieve the above two problems and correct the behavioral deviation of SOEs' M&A,thus improving the M&A performance.Finally,this paper explores the different effects of NSO shareholders' governance on SOEs' M&A performance under different external governance environments and internal governance mechanisms.The quality of external governance environment and the improvement of internal governance mechanism affect NSO shareholders' motivation and ability in corporate governance,which may affect the relationship between equity balance,appointing directors and the SOEs' M&A performance.From the perspective of external governance environment,on the one hand,in regions with higher marketization and legalization level,local government seldom intervene in the allocation of social resources,NSO shareholders' motivation of establishing political ties by holding SOE shares is lower,and the desire to participate in the governance to improve the economic efficiency of enterprises is stronger;on the other hand,when regional marketization and legalization level is high,local government seldom intervene in the SOEs operational activity with administrative power in order to achieve political goals,good protection on investors'economic rights by law bring NSO shareholders bigger voice in SOEs,thereby improving their governance capability.From the perspective of internal governance mechanism,there is an interactive relationship between various internal governance mechanisms of an enterprise,which may play a synergistic role in balancing the controlling shareholder's power and restricting the self-interest behavior of executives.High-quality internal supervision and incentive mechanism can better alleviate the insider control problem,reduce the government's administrative intervention and executives' ultra vires behavior,so as to lower the cost and obstacles for NSO shareholders realizing their rights in corporate governance.This dissertation is divided into seven chapters to discuss the above issues:Chapter one is introduction.This chapter introduces the research background,theoretical significance and practical value,research content and methods,and possible innovations of this dissertation.Chapter two is literature review.This chapter comprehensively reviews domestic and foreign literature related to shareholder governance,and sort out the research trends of factors affecting M&A performance.The inheritance and breakthrough of this paper will be highlighted on the basis of reviewing the existing research work.Chapter three is theoretical basis.This chapter introduces the M&A motivation theory,government intervention theory,executives' self-interest theory and shareholder governance theory,analyzes their role in supporting the logical relationship between contents of this paper,and constructs the logical relationship diagram of this paper.Chapter four studies the effect of NSO shareholders' equity balance and assigning directors behavior on SOEs' M&A performance,and further excludes alternative explanations,tests the impact of NSO shareholders'enthusiasm for voting in the shareholders' meeting on SOEs' M&A performance,the possible non-linear relationship between the NSO shareholders' governance role and SOEs' M&A performance,and the heterogeneity of this relationship under different shareholder nature and enterprise types.Chapter five is the research on the influence channel of NSO shareholders' impact on SOEs'M&A performance.This chapter studies the effect of NSO shareholders' governance on SOEs' M&A target selection and integration quality from the perspective of M&A behavior process,and test the intermediary effect.Then this paper further explores whether the NSO shareholders' governance improve M&A performance by reducing the policy burden and private income of executives,excludes alternative explanations,tests the heterogeneity of the relationship between NSO shareholders' governance and SOEs' M&A performance under different shareholder nature and enterprise types.Chapter seven is research conclusions,policy recommendations and limitations.This chapter will summarize the research results,form research conclusions.And based on the conclusions,this chapter will propose targeted policy recommendations for the mixed ownership reform and M&A management of SOEs.Finally,the limitations of this paper will be pointed out and the future research directions will be prospected.This research come to the following conclusions:(1)This paper empirically examines the effect of NSO shareholders' governance on the SOEs' M&A performance from perspectives of equity balance and assigning directors,and finds that the NSO shareholders' governance significantly improves the SOEs'M&A performance.Further research finds that:firstly,although local government's willingness of delegate power will improve the degree of NSO shareholders' participation in governance and the level of SOEs' M&A performance,it does not substantially affect the reliability of the logical relationship between the two factors;secondly,the higher the enthusiasm of NSO shareholders to vote in the shareholders' annual meeting and meetings involving M&A affairs,the stronger the relationship between NSO shareholders' governance and SOEs'M&A performance;thirdly,there is a potential inverted U-shaped relationship between the NSO shareholders'governance and SOEs' M&A performance,but this nonlinear relationship is not significant;fourthly,NSO shareholders with different nature paly different roles in governance,investors and private shareholders make a positive impact on SOEs' M&A performance through equity balances,while foreign shareholders' impact is not significant due to the low degree of shareholdings;three kinds of NSO shareholders all play a positive role in improving the SOEs' M&A performance by appointing directors;fifthly,the impact of NSO shareholders' governance on M&A performance is more obvious in local SOEs,but not in central enterprises.(2)This paper empirically examines the channel of NSO shareholders' impact on SOEs'M&A performance,and finds that NSO shareholders' governance significantly reduces the possibility of SOEs choosing a company in non-related industry as target in M&As,and increases the quality of M&A integration.NSO shareholders improve M&A performance through these paths.Further analysis shows that:firstly,NSO shareholders' governance improves M&A performance by reducing the policy burden and private income of executives;Secondly,although local government's willingness of delegate power affects the degree of NSO shareholders' participation in governance and the SOEs' behavior of choosing target and making integration,it does not substantially affect the reliability of the logical relationship between the two kinds of factors;thirdly,NSO shareholders with different nature paly different roles in governance,compared with foreign shareholders and private shareholders,institutional investors' governance significantly reduce the probability of SOEs choosing M&A target in non-related industries and improve the quality of M&A integration.Fourthly,the impact of NSO shareholders on the selection of M&A objectives and the quality of M&A integration is more obvious in local SOEs,but not in central enterprises.(3)This paper empirically tests the relationship between NSO shareholders'governance and SOEs' M&A performance under different external governance environments and internal governance mechanisms by group regression method.Empirical research shows that in the areas with higher degree of marketization and legalization,the effect of NSO shareholders' governance role in improving SOEs' M&A performance is more obvious;in the enterprises with more complete internal supervision mechanism and incentive mechanism,the effect of NSO shareholders' governance role on SOEs' M&A performance is more obvious.Further analysis found that:firstly,in the area with higher degree of marketization and legalization,and in the enterprises with more complete internal supervision mechanism and incentive mechanism,the NSO shareholders' governance role in reducing the probability of choosing companies in non-related industries as target and improving the quality of M&A integration of SOEs is more obvious;secondly,in the enterprises with higher quality of internal control and information environment,the effect of NSO shareholders' governance effect is more obvious.There are three possible innovations in this dissertation:Firstly,it enriches the research on the influencing factors of SOEs' M&A performance.The existing research on the SOEs' M&A performance mainly focuses on government intervention(Pan Hongbo et al.,2008;Fang Junxiong,2008;Huang xingluan and Shen Weitao,2009;Pan Hongbo and Yu Minggui,2011)and executive self-interest(Chen Shihua et al.,2015;Zhao Yan and Zhao Libin,2018).A small number of scholars found that institutional investors and the "state-owned" non actual controller can promote the SOEs'M&A performance(Zhou shaoni et al.,2017;Lu Dong et al.,2019).On the basis of previous studies,this paper examines whether all kinds of non-state-owned shareholders can play a governance role by checking and balancing the controlling shareholders and supervising the executives,and then improve the M&A performance,which provides new evidence for the study of the influencing factors of SOEs' M&A performance.Secondly,it analyses and tests the influence channel of NSO shareholders on SOEs'M&A performance.Most of the existing literature has not specifically discussed and directly tested the influence path of shareholder governance on M&A performance.According to the idea that economic behavior leads to economic consequences,a few scholars have discussed how shareholders' governance correct the behavioral deviation in M&A the process(Lu Dong et al.,2019),thus indirectly verifying the path of action.On the basis of previous studies,this paper uses three-step method(Wen Zhonglin et al.,2004)and selfhelp method to directly test the intermediary transmission effect of M&A target selection and integration.At the same time,combined with the practical problems such as government intervention and insider control of SOEs,this paper further analyzes and tests how NSO shareholders improve the M&A performance by reducing the policy burden and private income of executives,so as to make the research in related fields more detailed and in-depth.Thirdly,it explores the effect of NSO shareholders'governance on SOEs'M&A performance under various situations..Scholars at home and abroad have discussed the preconditions for shareholders to play a governance role in the process of analyzing various economic problems.This paper fully uses the previous research results for reference,systematically combs the internal and external environmental factors that affect the motivation and ability of NSO shareholders to play a governance role,brings the external governance environment,internal governance mechanism,internal control quality and information environment quality into the analysis framework of NSO shareholders'governance and SOEs' M&A performance,tests their relationship in different governance situations,and improves the understanding of theoretical boundary conditions.