Industry Cycle, The Type Of M & M & A Performance Empirical Research

I select 326 merger and acquisition samples which happed during 1998 and 2004. Ifirst classify the sample into 14 sub-samples by the industry stages of the acquiringand target firms. To measure the value effect of the M&A event on stockholder, I usedthe classic Event-Study Method to calculate the seven day CARs from 5 day beforethe fist announcement of the event to 1 day after the fist announcement of the event. Iused Cross-section Regression method to investigate the different value effect ofdifferent kinds of diversifying mergers and different kinds of related mergers.I find that (1)Both diversifying mergers and related mergers stockholder havepositive CARs and related mergers stockholder have gained more. The conclusion issignificant at the 5% level. (2) Related mergers in consolidating industries performedbest significant and the conclusion is significant at the 10% level. (3) Diversifyingmergers between growth industries and decline industries outperform related mergersin decline industries. My findings also support the hypothesis that ILC have confusedthe conclusion of tradional research about the performce of related mergers versusdiversifying mergers.This study is organized as follows: In section 1, I review the related literature. InSection 3, I classify 44 3-digit industries of China into four categories by industry lifecycle. In Section 4, I describe Event-Study Method, design variable of Cross-SectionRegression and put forward my hypothesis. In section 5, I empirically test whetherILC has any impact on the value effect of different kinds of mergers and what theimpact really is with Cross-Section Regression method. In section 6, I present myconclusion.