Corporate Mergers And Acquisitions Theory And Empirical Research

Activities of M&A started at the end of 19th century, which is the inevitable result of market economy. Since the end of 19th century, taking the USA as a typical representative, there have been five tides of enterprise annexation which have influenced the economic development of western countries. The activities of enterprise annexation of our country started in the middle period of the 1980s. The first annexation climax of our country appeared at the end of 1980s. Since 1990s, with the corporation of state-owned enterprise and development of the security market, the second annexation tides of our country appeared. During that period, there is new break-through no matter on the scale or in form in enterprise annexation, which is having a deeper and deeper impact on economic development of our country. The development of annexation theory is closely related with annexation practices. Since the first merger tide in history happened in U.S.A. at the end of the 19th century, foreign economists have explained the activities of takeover from all kinds of different angles, which have caused the formation of variable theories. Especially the past 20 years, the tremendous developments in enterprise's theory and game theory made the research of Annexation Theory become one of the most active fields in foreign economics. Because the relevant theories are too numerous and jumbled, this article only introduces the relatively prevailing ones at present time.M&A is a strategic investment activity of enterprise. While making a decision of annexation, profit is the datum which should be weighted. This article analyses and draws conclusions through structuring the profit model of annexations.Conclusion I: The merger of enterprises should be based on the rising of the earning ratio of former enterprises (or the former industry), That is E(R_A)> R₀, throughliquidizing remnant assets and utilizing the assets effectively, it makes the earningratio of the assets be promoted. Conclusion II: The earning ratio to the merged enterprise needn't entertain too great expectation. The situation that E(R_B) ≥ E(R_A)may not be the optimum . Conclusion III: While making the decision of merging, thetwo critical value adopted, p^* and q^* are not related with β_M, that is to say, they are not related with Cov(R_M,R_B), which indicates that whether enterprise merging is related or not does not influence the value of p and q .A large amount of research works on the results of the annexation practices in North America and Europe came out in the most recent 20 years. One of the most discussed and argued problems in Annexation Theory is the Wealth Effect of enterprises annexation. This article plans to use the Real Example Method from foreign countries and its researching frameworks to probe into the wealth effect merged, and further analyzes the facts that influence the wealth effect of our listed companies. It draws conclusions and realistic enlightenments:Conclusion I: during the period from the 10th trading day before announcements to the 30th trading day after announcements, shareholders of acquiring companies will win positive accumulated abnormal incomes.Conclusion II: the type of M&A does not remarkably influence shareholders' wealth of acquiring companies, but has a certain influence on the wealth of the targeted company.Conclusion III: stock right structures has a certain effect on the wealth effects of acquiring companies, but has little effect on the wealth effects of acquired companies.Conclusion IV: the shareholding ratio of the senior level has remarkable effects on wealth effect of targeted companies. From the conclusion of this article, we can see that the market of china is not yet mature. Most of present merging events are affected by government, and the situations that many acquiring companies compete with each other to purchase the same targeted company are rare. What deserves to be mentioned is how to avoid the bad related trade in the process of M&A in order to make the function of M&A really reflect the improvement of the lon...