Mergers And Acquisitions Market Response And Performance Persistence, Event Study

In the new period of world economics highly developing, multinational Merges and Acquisition (M&A) appears frequently, a lot of large corporations get further expand and develop by M&A. In the environment of world economic competition, corporations from China face the competition from the whole world, but we are lack of the theory and practice on M&A. Many scholars research on the scale effect, production cooperation effect of corporate M&A during the new environment. The event study on the market response and performance is devoid, and the existed studies are based on the years before 2001. After the M&A, what is the performance in short period, whether the corporations get abnormal return by M&A and the performance is durative? All the questions are focused in the study of this article.This article selects the samples of M&A of listed companies during 2002 by the way of event study methodology. It takes the company stock return and market return 40 to 10 days before bulletin to estimate by using the market model. According to further calculation of expected return, we can get the abnormal return of sample companies during the event time. We can estimate the effect of M&A bulletin during event time by calculating and analyzing the Cumulative Abnormal Return (CAR). The article also research on the long performance of companies from M&A by using monthly stock return and market return which is two years before bulletin to estimate and calculate the Cumulative Abnormal Return (CAR) in 2003, 2004 and 2005. It also uses the Buy and Hold Return (BHAR) to analyze and describe the durative performance of companies from M&A. The result of event study shows that only in a short time there exists positive abnormal return and good market response in corporate M&A but in the long performance is not perfect. The index of CAR and BHAR of sample companies presents negative and falls in the incessant direction. The main contents and study conclusions of the article are as follows:Chapter I : To bring forward the international and national research background, research significance, research thought and innovation.Chapter II: To explain the conceptions of M&A and classify from different angles, analyze the motives of M&A from exterior and interior ways. To retrospect the related theories on M&A and summarize the empirical research articles written by international and national scholars.ChapterIII: To discuss the thought of empirical research on the performance of M&A of Chinese listed companies. The main research methodologies on the performance of M&A are event study methodology, financing index and case study. We choose event study methodology which is the mainstream method to research on the performance of M&A(Caves,1989), review the relativity between stock price and M&A bulletin. It uses statistic analyses to test abnormal return basing on the regression result by market model.ChapterIV: To do empirical research on the market response and durative performance of M&A of listed companies . It uses market model to estimate in estimation period and calculate CAR to estimate the market response during event period by collecting all-data of e stock price and market index. It use monthly data to research on the durative performance following the thought of event study, calculating the CAR during 0 to 36 months after M&A. It also uses BHAR index to calculate and analyze. In all, the return of stockholder in 3 threes is mostly unapparent negative value, this is consistent with the study result by Andrade, Mitchell and Stafford(2001).Chapter V: To put forward the study result and advices of M&A of listed companies based on the results of empirical research.