Why Do Firms Engage In Merger And Acquisition? Evidence From Target Companies In China

Mergers and acquisitions(M&A) in enterprises become a hot study for scholars to research. According to the relative research of foreign countries, most of them supported that M&A in enterprises were driven by disciplinary motive. However, with different ownership structure and corporate government system from those of foreign listed companies, it is worth to study the motives of M&A of Chinese listed companies to find if other motives exist. Furthermore most researchers in China focused on theoretical analysis of motives of M&A and the empirical test of enterprises performance after M&A, the research on motives of M&A based on target characteristics is seldom reported. Thus, this thesis tried to find out the real motives of M&A of Chinese listed companies according to the characteristics of target companies. The results show that the firms that were subject to a takeover bid were, in general, characterized by having worse performance or a lower market valuation than other firms operating in the same sector. This result makes it easy to argue that M&A in Chinese listed firms have in their majority been driven by disciplinary motives. Moreover, certain variables that exert an influence over the cost of the transaction, such as the size, the ownership structure and the liquid portion of the stock of listed firms do appear to play a relevant role in the selection of the target on the part of the bidding firm.