Empirical Study On Mergers And Restructuring In Chinese Listed Companies 2005

The Mergers and Acquisitions have been expanding significantly on China's stock market in recent years. The ultimate purpose of M&A is to allocate the resources effectively in order to increase company value. The M&A will change listed company's share price and influence company value. On June 6th,2005,Shanghai composite stock index dropped below the 1,000-point level and fell to 998.23 points,returning to the starting point of 8 years before. During the whole year of 2005,China's stock market was in a great depression which was worse than ever, investors in the Shanghai stock market and Shenzhen stock market were few and dealings shrunk,funds were in the state of wait-and-see,the average daily turnover was less than tens of billions RMB Yuan. In such market condition,whether M&A will bring value for companies is a subject worth studying. Adopting the Event Method and Accounting Method (Financial Indicators Method),this paper makes an empirical analysis of 752 M&A of 587 companies listed on Shanghai and Shenzhen stock market in 2005. The analysis indicates:within the event period (-49 days,40 days),M&A companies'values have been increased. The average CAR (Cumulative Abnormal Return) of M&A firms within the event period was 0.5721%;for acquiring firms and acquired firms,the average CAR were respectively 0.641% and 0.5078%;M&A in different industries show different average CAR within the event period,M&A brought a value gain of 0.4112% to the firms in the manufacture industry,a value gain of 0.6762% to the firms in the real estate industry,and a value gain of 0.364% to the firms of integrated industries; within a longer observation period(more than one year),the financial condition of M&A companies showed a certain degree of decline in the first year yet an obvious improvement in the following year;among the factors that affect the M&A's performance,the M&A type,M&A companies'industries , M&A companies'ownership structures ( controlling shareholders'types),stock market's fluctuation and multi-merger have certain impacts on company value.