Agency Problems In The Mergers And Acquisitions Of Listed Companies In China

Waves of mergers and acquisitions among US enterprises have spread globally. Merger and acquisition (M & A) has become a very important strategy for a company, for many famous companies have employed the strategy successfully for development purpose. This study focuses on the agency problem during the process of M & A. Based on the review and analysis of relevant theories like M & A, agency-principal problem, corporate governance and investment banking, the author holds that there are two types of agency problems in M & A—the interior and exterior agency problems. Traditional agency problems between managers and shareholders and between controlling shareholders and minority shareholders belong to interior problems, while exterior agency problem is between companies and their agents for M & A, especially the investment banks.The thesis employs empirical methodology to analyze interior agency problems faced by China's listed companies merged or acquired from 2001 to 2005. After putting forward hypothesis and making quantitative and regressive analysis of selected samples with the econometric software Eviews, the study draws a conclusion that in the short term the interior agency problems in listed companies will be relieved with the increase of shareholding proportion of the controlling shareholder after the declaration of M & A, and in the long term, the interior agency problems have a negative correlation with the logarithm of the differences between tradable and non-tradable share prices. A case study is used to explain the exterior agency problem between companies and investment banks.Influenced by some factors like"financial statements M & A", the research results are not perfectly consistent with the theoretical hypothesis. To solve the problems, Chinese government, companies and investment banks should take immediate measures to realize effective and healthy M & As.