Empirical Study On The Performance Of M&A Of Listed Companies

Most of the evidence demonstrates that takeover can bring remarkable premium for target firms, but can not do good for the raiders. This article only focuses on the target firms. Does the raider who replaced the incumbent get the premium? "The economic effect of M&A " in the second chapter can explain where the premium comes from. But interpretation for who get the premium in the long term from Chinese scholars is lack of proof in theory. So in this paper, we set up a free-rider model in chapter three to explain it in theory. Due to the free-rider behavior in stock market takeover will never succeed. The raiders are unable to derive any benefit from the value enhancement because free-riding by dispersed shareholders fully captures the raider's value enhancement. We selected 120 samples of merged company in 2001 in Chinese stock market involving more than 14000 data to do empirical analysis using event studies. We find that the raider who replaced the incumbent did not get the premium. That is to say the model's hypothesis and inference exist in our sample. So we can deduce an important conclusion to solve this question. A possible solution to the free-rider problem is to write a corporate charter that allows the raider, once he takes over the firm, to dilute the share value of the non-tendering shareholders. Therefore we can protect the buyers' benefit and insure the performance of M&A against failure.