An Empirical Study On The Corporation Governance Structure And Conglomerate Merger Motives

As one of the most important factors of capital market distribution, merger and acquisition (M&A) influences the enterprise value very much. The research on this field is very popular recently. The types of M&A are different because of the different industries, and the effects are different. The research on the motives of choosing lower effective type of M&A is very vital if the differences among different types of M&A are significant.This paper investigates the empirical effects on corporation governance and Conglomerate Merger of publicly traded China firms in the 2001-2005 periods. We control the effects of size of the company, related transaction and industry; check the differences among three different types of M&A. The results show that value of the company of Horizontal Merger and Vertical Merger is better than Conglomerate Merger. Besides, we find the relationship between value of the company and the level of diversity.Then, this paper discusses the motives of Conglomerate Merger based on the idea of the former research and corporation governance. The result shows that the ratio of independent directors and the stock ratio of No.1 shareholder, No.2 to No.10 shareholders and managers can weaken the motive of Conglomerate Merger. But the company which has the same director and manager tend to do so.Our findings show that the value of Conglomerate Merger is worse than Horizontal Merger and Vertical Merger in statistics. Companies choose Conglomerate Merger because the manager of the companies has his own benefits or overconfidence. So we should pay more attention to the corporation governance so as to avoid the choosing the wrong type of M&A.