An Empirical Analysis On The M&A Performance Of Listed Companies In 2005

M&A plays an important role in a company's expanding,and for Chinese companies it definitely is an effective way to become bigger and stronger. M&A brings fluctuations to both the companies'stock price and the value, which are described by performance. There have been lots of studies on M&A's performance, whether the method they used is the analysis of accounts or the event study, most achieved the same conclusion: M&A can bring remarkable premium for target firms, but can not do good for the raiders. In this paper, the background of China's reform of non-tradable shares which was started in 2005 is discussed, with hope to see how the performance of the M&A behaves during this special time. This study selected 156 listed companies which had M&A in Chinese stock market in 2005, including 75 raiders and 81 target companies. One the one hand, the existed theories of M&A are introduced, and the history and characters of China's M&A are analyzed. On the other hand, event study is applied to the data to do empirical analysis. Finally, we find that M&A can bring positive effect to the raiders, but the effect on target companies is not clear. This result is connected with the characters of China's M&A recently. The M&A market is not normative and mature yet, while the government still plays an important role in it, which made the benefits'unbalance distribution between both sides of the M&A. The company's actual controller's ownership affects a lot on the M&A's performance. State-holding companies achieve more significant and sustaining positive performances, and this phenomenon is more obvious when the company is a raider. Besides, the M&A information may has been divulged before it is disclosed officially and it affects the normal reaction of the M&A event, which also reflects the non-normative of China's capital market. In the end of this paper, we proposed some policy suggestions of the development of the M&A market, and we believe that its development needs not only the companies'growing up, but also the effort of setting right industry developing orientation and the financial system's reform, etc.