The Empirical Study On Motivation And Performance Of Diversified M&A About Listed Company In China

Diversification plays an important role in economic development in many countries. Mergers and acquisitions (M&A) become the focus, as the corporate strategy for the implementation of the basic means of diversification. With the capital market continues to open up, more and more enterprises in China adopt the diversified M&A to achieve diversification. Under such situation, better understanding of the motivation and performance of diversified M&A would be a great help to Chinese business.In this paper, I annotated the concept of corporate diversification based on reviewing the literatures, concluded the motivation theory of the company's diversified M&A, summarized the empirical study of the performance of company's M&A using of event study method and accounting index method domestic and international, and explored suitable method for our country M&A performance study.In empirical context, this paper chose 105 M&A events as the study samples from China's securities market during 2000-2005. I investigated the relationship between diversification and corporate performance of listed companies in China from the perspective of M&A. First of all, the paper utilized the factor analysis to a comprehensive study of the dynamic change of performance before and after M&A about correlative M&A and diversified M&A. It was found that, the first year after M&A, there's no significant impact on the performance of the acquired companies, and the second year after M&A, there's a significant positive performance of the acquired companies of diversified M&A, but there's a significant negative performance of the acquired companies of correlative M&A. Firm performance before M&A was regarded as the important internal factor of diversified acquisition besides free cash flow, the government associate. In addition, the industry factor is also considered as external factor. Then, empirical study was made by using correlation analysis, K-W nonparametric test, and multi-linear regression analysis. The study showed that:①the companies with poor performance are more willing to took place diversified M&A;②the companies with higher free cash flow more easily choose to diversified M&A;③industry factors affect the option to choose the type of M&A, there's a significant difference to choose correlative M&A or diversified M&A between different kinds of business.In conclusion, according to the research results, this paper put forward some suggestions based on the actual situation of Chinese enterprises. Except that it would be helpful to deal with diversified M&A correctly to improve firm performance.