A Impact Study Of Broker Networks On The Acquired Efficiency Of NEEQ Companies And It's Wealth Effect

As an important part of China's economic development,how to break through the dilemma of financing and development,then growing into the middle stream of capital markets,the Small,medium and micro enterprises is the focus of attention with the country,industry and academia.In order to improve and develop the capital market,China established and piloted the "off-site" capital market under the guidance of the government in 2001,which called the "agent share transfer system".It is in better shape by 2006,and was call “NEEQ”.The establishment of NEEQ platform has created an opportunity to solve the financing and development difficulties of small and medium-sized enterprises.By the end of 2018,there have 10,691 listed companies,with a total market value of 3448.726 billion yuan in NEEQ.At the same time,the NEEQ's M&A activities are increasingly,the industry calls the NEEQ as the "The underlying pool" of listed companies' M&A.There have two reasons that listed companies prefer to acquire NEEQ companies:(1)The small and medium-sized enterprises account for 90% of NEEQ,with advantages such as high growth,high profitability potential and patented technologies.However,they faced different degrees of development constraints,and hope to achieve M&A financing and obtain resources with the support of NEEQ.(2)The listed companies of Shanghai and Shenzhen stock market,which lack the potential information channels when facing the massive investment choices of unlisted enterprises,so it is difficult to find a matching target company.The NEEQ provides a platform for both parties to conduct M&A,saving time,cost and energy for both parties to transactions.However,the NEEQ still has problems such as imperfect system,insufficient information supply and asymmetric information,which leads to decrease the investors' trust and recognition degree of NEEQ,and the increase of the dependence of information and stock flow on broker.Moreover,the NEEQ implements the trading institution of host securities and market makers,and securities firms play various roles in the capital market(such as lead underwriter,underwriter of IPO,financial adviser of M&A,institutional investors and securities companies,etc.).So that brokers play more prominent role in NEEQ.Therefore,the small,medium and micro-sized enterprises as a weak party in M&A financing,By virtue of NEEQ and professional advantages of brokers,they can improve M&A financing ability.Through literature review,we found that there are a lot of domestic and foreign literatures studying M&A by the acquiring party,while there are few literatures considering,discussing and studying the influence of financial intermediation on M&A with acquired party.Previous studies have provided space,rich and reliable viewpoints and methods for the thinking and exploration of this paper.In the above background,brokers relying on information,M&A experience,resources and professional services,and meet the needs of M&A financing of two paryies,use their network to build a "bridge" channel connecting between NEEQ company and listed company.Which has a positive impact on the efficiency and wealth effect of M&A.Based on the literature review and related research theory,we found the broker intervention into NEEQ companies were merged transaction by listed companies,and play an important role.This paper focused on the relevant interests of the acquired NEEQ companies,broker network on the acquired NEEQ companies' wealth effect,to explore the efficiency of M&A(merger and acquisition premium,payment and transaction efficiency)intermediary role between broker network and wealth effect of the merged companies.The contents of this paper summarized into three parts:First of all,question raising,literature review and theoretical analysis(chapters 1and 2).1.Analyze the background of NEEQ companies were merged by listed companies,the functions and characteristics of broker in NEEQ,and relevant Literature review.We put forward these questions:(1)Does the brokerage network have an impact on M&A efficiency(M&A premium,payment mode and transaction efficiency)?(2)Whether have the change of the wealth effect of the acquired party?(3)What is the nature of this effect?2.According to information asymmetry theory,resource dependence theory,organizational learning theory,financial intermediation theory and game theory as a foundation,we interpretive the relationship between brokerage network and acquired NEEQ's company was by listed companies.3.The business connection between brokers and capital market companies,which to analyze the formation mode and mechanism of brokers' network.It expounds the support of network centrality of broker to M&A information,resources and experience,which influences M&A gamble,efficiency and shareholder wealth effect.Secondly,we analysis the mechanism of securities broker network's influence on NEEQ companies were merged by listed companies(chapter 3).1.Review the development history of NEEQ:(1)Summarize and analyze the current situation and characteristics NEEQ,as well as the differences with the Shanghai and Shenzhen stock markets.Then explore the internal driving factors of NEEQ companies seeking financing and control transfer,and the reasons why listed companies prefer NEEQ companies.(2)Analyze the relationship between brokers and NEEQ companies,and explain the motivation of brokers to participate in M&A.It is find that brokers and NEEQ's companies are direct stakeholders.Therefore,brokers are largely participating in NEEQ's economic activity,so the brokers use network resources for the NEEQ's company screening of listed company acquisition,then meet the interest of both sides of M&A.2.Summarize the ability of broker network to influence the M&A,Including information aggregation,experience spillover,resource control,risk control and mediation governance capabilities,put forward analytical framework of this paper.3.On the basis of the above,through case study and preliminary observation of network connection data,we found that broker connection on the NEEQ is more feasible than major shareholders' connection and directors' connection.Finally,Based on the analysis,elaboration and clarification of the relationship between broker network and the M&A efficiency and wealth effect of NEEQ companies in chapters 1 to 3,and put forward relevant research hypothesis.We empirically studies the influence of broker network on the wealth effect of acquired NEEQ companies and the Intermediary effect of M&A efficiency between them(Chapters 4 to 6),then answers the questions raised in this paper.The first step,we explore the network connection relationship of brokers.The centrality of broker network model based on the connection relationship between the host securities traders of NEEQ companies who are also the lead underwriters of IPO with listed companies.The second step,we examine the relationship between the broker network and the efficiency of NEEQ merged company.From the perspective of the acquired company's interests,we found two points:(1)Broker network centrality has positive effect on M&A premium and payment mode.(2)Broker play the role of "channel" for communication between M&A parties,reduce merger friction and uncertainty,improve transaction efficiency and optimize resource allocation.The third step,we examine the relationship between broker network and the wealth effect of M&A of NEEQ merged companies.1.Taking [-60,45] before and after the merger announcement as the window period and 106 working days in total,then discusses the relationship between broker network and the short-term accumulated super-normal rate of return(CAR)of acquired NEEQ companies,and observes the changes in the short-term shareholder wealth value of acquired NEEQ companies.Brokers and analysts spread information about M&A through the Internet and media,which has an impact on the window wealth of NEEQ' acquired companies.2.Based on the changes of ROE and asset growth rate by the end first year and second year after the completion of M&A,we discusses the influence of broker network on the changes of long-term shareholder wealth value of the acquired NEEQ companies.After the NEEQ companies were acquired,broker still serve as the host securities dealers,continuous supervisors and market makers,and will actively urge and help the acquired companies to improve their performance due to their responsibilities,reputation and earnings.The fourth step,we examine the mediating effect of M&A efficiency.1.The announcement of merger premium and payment mode contains information with both parties of transaction.In addition,broker and analysts will release information conducive to M&A,attracting attention from investors,resulting in stock price fluctuations of acquired companies in the window period.2.We analysis the impact of M&A efficiency(M&A premium,payment mode and transaction efficiency)on shareholders' wealth effect of acquired companies in NEEQ.M&A efficiency will affect synergy effect and integration effect,improve resource allocation efficiency,and play a positive role in wealth effect of acquired NEEQ companies.We use OLS and Logistic models for regression of the study variables,and Bootstrap model for robustness test.Then use the reputation and amount of analysts as the instrumental variables to explore endogenous problems by using two-stage(2SLS&2GMM)regression model.The results show that the reputation of securities firms and the number of analysts are consistent with the regression results of network centrality.We draw conclusions and put forward the following Suggestions:(1)Improving M&A policy of NEEQ,market supervision and risk prevention awareness,to protect the interests of the majority of small and medium-sized Investors.(2)Improving the brokers,market makers and continuous supervision system of NEEQ continuously,enhance the financing ability of listed companies,and improve the liquidity and efficiency of NEEQ.(3)Strict audit rules for enterprises to enter and list on NEEQ,improve the exit system and lower the threshold for investors to enter.(4)Inject national credit information regulation into financial intermediaries and NEEQ to protect legitimate transactions and reject illegal operations.The innovation of this paper can be summarized four points:(1)Expansion of the research content of broker as financial intermediaries.Based on China's situation and capital market system.(2)We research content is extended from the perspective of the acquired party.Based on the perspective of the interests of the acquired party.(3)We analyzes the connection relationship of securities firms and makes a preliminary discussion and definition of broker's network.(4)The premium,payment method and transaction efficiency of M&A,which also affect the wealth effect of the acquired party.As the acquired party,the NEEQ companies will also actively look for ways to influence the efficiency of M&A,and seek to increase earnings.It will actively strive for its game advantage with the help of brokerage network to improve the efficiency of M&A with the wealth effect of the acquired party.