Study Of The Waves In China's M&A Activity On The Basis Of Industry Shocks

While mergers occur in waves, merger waves also influences mergeractivities. Up to now, takeover waves are one of the top ten unexplained puzzlesin the field of financial economic. The industry shocks theory provides a newframe to study the merger waves. This paper aims to uncover the phenomenonand trend of the merger waves, discover the cause and characteristic, and find outthe decisive factors. Thus, the paper gives a beneficial enlightenment to thedeveloping merger activities among the domestic enterprises.In this paper, we firstly describe several merger waves in China and all overthe world respectively, and then on the basis of relative research results homeand abroad we choose industry shocks theory which is suitable for China toexplain mergers waves. Secondly, we make a systematic explain on the frame ofindustry shocks theory under which we analyze several important waves and weproposed several factors influencing the formation of merger waves. Weinvestigate the merger wave hypothesis for domestic mergers employing afrontier of wave model- a Markov regime switching model. Using monthly listedcompany merger data covering the year 2001 to 2005, we verify the existence ofthe wave-like pattern merger activities in China. In the end, we establish aregressive model on industrial shocks and merger activities under the industrialshocks theory to assess the shock factors on the industry level, come to theconclusion, and revisit quantitative evidence on the merger wave hypothesis.In this paper, we draw the international frontier empirical literature aboutthe merger waves into the study of China. We employ a Markov regimeswitching model to describe the stochastic behavior of merger activities under theframe of industrial shocks theory.