Wealth Effect Of Cross-border Mergers And Acquisitions Of Chinese Enterprises The Main And Side

Feb 12^th, 2009, Aluminum Corporation of China ("Chinalco"), a leading Chinese diversified resources company, invested US$19.5 billion to Rio Tinto, a world resources leader to build a pioneering strategic partnership. It is absolutely the largest cross-border Mergers and Acquisitions (CM&A) for Chinese enterprises and it's also the prologue to new cross-border M&A tide.With the fast process of economic globalization and expansion of economy scale, CM&A is definitely becoming one of the outstanding characteristics of economy of today. After 30-year accumulation in economic strength with reform and open policy, Chinese enterprises are seeking more opportunities to "go abroad" to participate international business and competition, especially with the macro situation of China's joining WTO, "Go Abroad" policy by Chinese government, RenMinBi's appreciation and abundant foreign exchange.On the one hand, Chinese enterprises are enthusiastic in CM&As, on the other hand, bad news of failed CM&As come one after another: TCL's decline, Lenovo's bad performance with IBM PC, SAIC's withdraw from Ssangyong Korea with a loss of US$0.5 billion, and so on. Facing the numerous failed cases, it is a key issue to consider how to evaluate the performance of Chinese CM&As effectively and to regard what CM&As bring to our enterprises and shareholders objectively, to help them win the gambling. This is the study motive of this thesis.In this thesis, the following two points will be adopted to study the economic consequences on CM&A by Chinese enterprises: firstly, with the stock data of Chinese listed companies, Event study will be used in empirical test of wealth effect to the buy side in CM&A. The wealth effect of M&A can study the economic consequences on both sides from the micro-level to identify whether the M&A create value or not. With reflection from stock price of samples in event study, it is easy to know how capital market regards the value of M&As.Secondly, typical case study on Bank of China's acquiring SALE can show the performance by the contrasts of changes in both abnormal return in stock price and key financial factors.Based on the fore empirical study on performance of CM&A of Chinese listed companies, the possibility of creating value to the buy side will be tested and reference from empirical study will be put forward to Chinese enterprises to go abroad.The empirical analysis indicates that wealth effect on Chinese bidders is significantly negative on condition that the CM&A will affect the whole performance much.