An Empirical Study Of M & A Performance Of Pharmaceutical Listed Companies In China

As an effective approach to adjust industrial structure and expand corporation running scale rapidly, merger and acquisition (M&A) has always been a hot issue in listed company research. There is considerable research of the performance of M&A made by domestic and foreign scholars, however, no unified conclusions have been obtained so far.With the stock market's growing maturity and the development and expansion of the pharmaceutical industry, M&A activities of the pharmaceutical industry in China frequently took place. This paper chose the pharmaceutical industry as the study's entry point, examined the impact of M&A activities on corporate performance through the empirical study of M&A cases of pharmaceutical listed companies in China in 2004, and assessed the advantages and disadvantages of M&A cases of pharmaceutical listed companies in China.At the beginning, this paper reviewed and summarized the relevant research of M&A performance at home and abroad, then introduced the development of M&A activities of pharmaceutical listed companies in China, and executed theoretical analysis and empirical analysis on the basis of the above content.First, this paper used event study to examine the impact of M&A activities on short-term performance of pharmaceutical listed companies in China. In the empirical analysis, we chose the pharmaceutical listed companies in China occurred M&A transactions in 2004 as research samples, used the Capital Asset Pricing Model (CAPM) to calculate the sample companies' cumulative abnormal returns (CAR) in the event period (-20,20), and judged whether the sample companies' shareholder wealth has increased through M&A activities. On this basis, we investigated the influence of different types of mergers and acquisitions,the same jurisdiction and related party transactions on short-term performance of M&A activities.Then, we used accounting study to examine the impact of M&A activities on long-term performance of pharmaceutical listed companies in China. According to relevant regulations and available research, we preliminarily selected 14 financial indicators which could fully reflect the corporate's performance, used SPSS software for data verification, and defined 7 financial indicators suitable for factor analysis, such as return on assets, cost expenses profit margin, main business service profit margin, acid-test ratio, inventory turnover, net profit growth and capital accumulation rate. We constructed evaluation function by the common factors extracted from the above 7 financial indicators using factor analysis. By comparing the difference of the scores before and after the mergers and acquisitions, we could judge whether the mergers and acquisitions significantly improved the long-term performance of pharmaceutical listed companies in China.By the empirical research, this paper got the following conclusions:Firstly, from the perspective of short-term performance, during the pharmaceutical listed companies in China occurred M&A transactions in 2004, the buyer firms can obtain significant cumulative abnormal returns in the event period, while the target firms could not receive cumulative abnormal returns in the event period.Secondly, by comparing analysis, we found that M&A type has different influence on the short-term M&A performance. The sample companies which M&A type is stock acquisition, and asset stripped, could profit from the merger and acquisition event, while the acquisition of assets and equity transfer firms can not get significant cumulative abnormal returns in the event period.Thirdly, the same jurisdiction and related transactions has significant negative effect on the short-term M&A performance of the sample companies. The shareholder wealth of buyer firms and target firms involving in same jurisdiction and related transactions loosed more than 10% in the event period.Finally, from the perspective of long-term performance, the M&A transactions basically has no significant influence on the long-term performance of the buyer firms and target firms. Both two types of sample firms' performance increment in the fourth year after acquisition is negative, but the statistical test results were not significantly different with 0. However, this result does not mean that all companies' M&A transactions are invalid, because the positive ratio showed performance increment of more than 50% of buyer firms and 40% of target firms is positive, this indicated that part of the company's M&A activities are valid, the development of long-term M&A performance was in good pcondition.