A Study Of Application Of Capital Pricing Model(CAPM) In Transnational Mergers And Acquisitions

Transnational mergers and acquisitions (M&As) have overwhelmingly swept the whole world, and the scales of which are becoming larger and larger. Transnational M&As has been the main manner of foreign direct investment (FDI).To this kind of large-scale transnational M&As, it could be expected that surprising proceeds could be held accompanying with serious risk, such as developing strategy, integrity after M&As, especially for value assessment, so variable value assessment theories are developed to direct and explain kinds of M&As. Such variable kinds of assessment manners are more qualitative than quantitative, more scattered than systematicTo the transitional M&As, it is most important to assess the risk and value of the merging and merged parts. Traditional value assessments manners include proceed method, market method and assets method. Proceed method is mostly popular for its theory advantage and flexibility, and widely accepted by investors. So return rate assessment for merging and merged companies, which is also critical factor of proceed method, becomes the most important step.Share-interchange is a popular payment for large scale transnational M&As, while CAPM is an authoritative tool to asses stock risk, to forecast the future return. So CAPM is also a useful tool applying in transnational M&As.Since its naissance, CAPM has experienced many years' development and validation, and there have been some doubts and demerits, this propelled CAPM developed into MCAPM. Further more traditional constant (fixed) β coefficient CAPM also arise doubt, all these make us necessary to modify CAPM during its application.CAPM is originated for establishing a single index model to forecast the risk of certain stock by forecasting β coefficient of the stock. This paper expands the application of CAPM in more broad and similar market, such as bond market and industrial market, and to international market as state risk market, all these depend on its flexible application.CAPM has induced a revolution of modern financial theories. Classical CAPM is just used to forecast the future return of financial assets by assessing systematical risk in one country. To the much complex transnational M&As, other risks, such as state risk and cultural risk should also not be neglected as well as systematical risk, and CAPM is just such kind of valuable tool. In this paper all these risks have notonly been discussed, but also combined into integrity for terse assessment about transnational M&As.And after devotion to the assessment of stock company about its transnational activities, through adjustment of β coefficient, or comparable company as reference, CAPM can be used to assess almost all kinds of companies and manners about M&As.