The Impact Of Wave Characteristics Of M&A Transactions On M&A Performances

Mergers and acquisitions(M&A),as crucial means of enterprise expansion and resource allocation,have a complex and far-reaching influence on enterprises.Especially,the rapid development of China’s M&A market after the 2008 financial crisis has attracted widespread attentions,and therefore overwhelming researches around the influencing factors of M&A performances,including transaction characteristics,firm characteristics,intermediary characteristics as well as environmental characteristics.However,so far,there is no reports about M&A performances of Chinese acquiring firms from the perspective of wave characteristics of M&A transactions.The wave characteristics refer to the M&A timing related to the merger wave,which can be divided into two aspects: M&A takes place within or outside the wave,in the early stage or in the middle and late stage of the wave.The occurrence number and time of merger waves in China have not yet been confirmed.In the view of practical needs and theoretical deficiencies in the development of M&A activities in China,this dissertation focus on the longterm post-merger accounting performance and conducts a systematic study around the following three issues: first,the confirmation and marking of merger waves in China’s capital market;second,the measurement and evaluation of the long-term M&A accounting performance of the acquiring firms;third,the impact of wave characteristics of M&A transactions on M&A performances.Herein,we take the M&A transactions of China’s listed companies from 2007-2018 as a sample,and combine the methods of normative and empirical research to our study.The main conclusions and innovative achievements of this work are summarized as follows:Firstly,this study modifies the Harford method based on Monte Carlo simulation,and then used the modified Harford method to detect the merger waves.We found 3 market-level merger waves and 18 industry-level merger waves of listed companies in China during 2007-2018.Furthermore,we accurately mark the starting and ending times of each merger wave.This work,based on scientifically empirical research,answers the questions about the occurring number and the starting and ending times of merger waves of listed companies in China.As opposed to the existing studies that draw conclusions based on empirical judgments and data descriptions alone,our results extend the detection of merger waves in China to the industry level for the first time and make it possible to study the impact of the wave characteristics of M&A transactions on M&A performance.Secondly,we integrate the advantages of the multiplicative difference method and the paired firm method to control the effects of multiple adulterants when estimating the long-term M&A accounting performance benchmark.As a result,it effectively overcomes the measurement bias of M&A performance that may result from the existing literature using firms’ own pre-merger performance,their industry performance,or their own pre-merger performance adjusted by industry performance as the benchmark.The study finds that,on average,the excess operating cash flow to total assets ratios of acquiring firms from year 1 to year 3after M&A completion are 1%,1.8%,and 1.9%,respectively,and they are significant at the 1% level.In addition,the excess financial composite performance scores derived from factor analysis are 0.075,0.050,and 0.042,respectively,and at the significant levels of 1% or 5%.It indicates that on average,the operating cash flow and comprehensive financial performance of Chinese acquiring firms are significantly improved after the completion of M&A.Thirdly,this study is the first to introduce the wave characteristics of M&A transactions into the study of influencing factors of Chinese listed companies’ M&A performances.The multiple linear regression model and propensity score matchingdifference in difference(PSM-DID)model are conducted to reveal the relationship between them in terms of in-wave and out-wave,and pre-wave and post-wave.After the completion of M&A 2 to 3 years,the merger wave dummy variable has a negative correlation with the M&A performance at a significant level of 1%,and this negative correlation is limited to non-state-owned acquiring firms.It indicates that the M&A long-term accounting performance of out-wave transactions is significantly better than that in-wave transactions.Besides,the nature of ownership of the acquiring firm has a moderate effect on this relationship.Furthermore,there is a negative correlation between the first-mover dummy variable and M&A performance at the significant level of 1% in 1 and 2 years after the completion of M&A,indicating that within the M&A waves,the M&A performance of a late-mover is significantly better than as an early-mover.Therefore,there is no first-mover advantage in China’s merger waves,but rather a late-mover advantage.The above findings expand the influencing factors study of M&A performance from the perspective of the wave characteristics of M&A transactions.In addition,it renders a theoretical basis for regulators to properly guide and supervise firms to carry out rational and efficient M&As,and also provides useful references and lessons for listed companies to choose the best M&A timing in their future M&A activities.