Analysis Of Acquisition Based On Target's Cash Holding

Both the researches in the Western countries and China show that, if a company holds too much cash, there exists a severe agency problem between the company's shareholders and managers.In the Western finance industry, it's commonly accepted that a company with sufficient cash holdings is an attractive takeover target. The market for corporate control can monitor the company's cash holdings, thus controls the confliction between the shareholders and the management level. However, although there are 2 contradictory viewpoints toward this affair in the Western academia, they both rely on the characters of acquisition and anti- acquisition behavior.This thesis analyses the market for corporate control of Chinese domestic companies and the acquisition behaviors, and then points out the difference with the Western counterparts. Since the share of the listed companies in China is mainly held by several controlling shareholders, the acquisition can only be successful after reaching agreement with them. On the other hand, the market for corporate control in China protects the target companies more than the Western countries. As a result, as long as...