Relationship Among Agency Problem, Corporate Governance, And The Performances Of Mergers And Acquisitions

Stepping into the 21st century, serious corporation financial fraudulences continuously happened in the world. After the waves of financial fraudulences, marked with "Sarbanes-Oxley Act", the government regulatory bodies around the world have launched a strict supervision, and strengthened corporate governance movement. Within this movement, as one of major strategic decision-makings, M&A has earned great concern by academics, and scholars have been discussing the relationship between corporate governance and the performance of M&A.Although domestic scholars have made a lot of meaningful efforts on the topic of M&A, the existing literature of M&A relatively focused on the announcement effect of M&A and the evaluation of long-term financial performance. Except the two dimensions, the relationship among agency problem, corporate governance, and the performances of M&A is seldom researched and hasn't been completely discussed. To make up for the deficiencies of the existing research, this paper reviews and analyzes the literatures of agent problem, corporate governance, performance evaluation of M&A and the effects of agency problems and corporate governance on the performance of acquiring firms, in order to establish a theoretical research framework, and the research hypotheses to verify. Later, this paper employs 50 corporations from the A-share listed companies in China which have implemented M&A transactions in 2004. With the market model of event study, this paper tests the announcement effects of M&A, and employs the financial index study method to verify the change of long-term financial performance of acquiring firms. At last the empirical study employs Multiple Regression Model to verify the effects of agency problem and corporate governance on the short-term and long-term performances of M&A. Eventually with the four integrated dimensions, this paper looks forward to show its research contribution.Through the empirical research, The results of this paper are as follows: 1 .M&A announcement has a significant negative effect on the wealth of acquiring firms' shareholders; 2.The M&A information leak is supposed to exist; 3.The long-term financial performance of acquiring firms has declined after merger; 4. Acquiring firms may use M&A transactions to gloss over the financial statements; 5.Ownership structure, the proportion of debt financing and other corporate governance variables show a significant effect on the announcement effects of M&A; 6.Free cash flow, ownership structure, the proportion of independent directors and the proportion of debt financing and other corporate governance variables have a significant impact on the long-term financial performance of acquiring firms.Targeting at potential problems, based on the background of China's capital market, this paper provides the following suggestions: 1.To strengthen the protection of the legitimate interests of small and medium-sized shareholders; 2.To improve the information disclosure system for listed companies; 3.To be Cautious about M&A activities, and advocate strategic M&A; 4.To strengthen the powers of the corporate governance.