The Study On Merger Performance Of The State-owned Enterprise And Motivations For Government Interventin

In order to establish some competitive companies in the world, the SASAC assessed to reduce the central enterprise quantity in the end of 2006, the central companies outside the top three in every industry would restructured. For keeping independent status the central enterprises expand themselves by M&A which are the fastest and easiest way in expansion. A lot of local enterprises are merged by central enterprises, local governments as the owner of local enterprises are supportive of the movement.The purpose of this thesis is to analysis that why local governments are supportive to sell local state-owned enterprises (abbr. local enterprises) to central enterprises. Local enterprises are the most important part of local economy and the major source of taxation so they would be the important asset of local governments. And by the requirement of appraisal system for promotion now officers should pay attention to local GDP, employment rate and tax. Now the local enterprises are crucial for local economy, therefore the development local enterprises can not only promote local economy but also effect the promotion of local government officer. So what's the motivation of local government in the movement of selling local enterprises to central enterprises? The reasons are the local enterprises'difficulties, local governments with the incapacity or something else?For the reasons, this paper start with the theory of government intervention and M&A, the general motivation of local government in selling local enterprises is presented. Then considering the characteristic of our changing society and economy some special motivations are presented. Evaluation model of finance by analyzing some general characteristics of the effect to local enterprises and the income of local government, then with considering government intervention index, market degree index and corporate finance index empirical model is created. On the empirical model, the factors that effect the government intervention in the situation when local enterprises are merged by central enterprises and local government's intense motivation in ownership translation to central enterprises are analyzed.To achieve the researching goal the main content and logic sequence of this thesis are given below.In the first part researching background is introduced, the researching goal and some basic conception are defined, in the meantime, the logic sequence and the proper contribution of this thesis are explained.The second part is literature review. In this part from the government functions point view the literature about enterprises' mergence is introduced for analyzing the theory of government intervention, then from the points of merger motivation and merger performance the classical theories are analyzed. The reasons and effects of government intervention in enterprise' mergence are analyzed by detail. The general motivations why local government intervene enterprise mergence are summarized by analyzing the performance in intervening of enterprise' mergence.The third part is about analysis on system background. In the meantime the special institution in which the china government intervenes the enterprise' mergence is summarized, the changes of different steps about intervening the enterprise' mergence by china government are analyzed, in addition the special motivations of mergence promoted by government, enterprise and stakeholders are analyzed.The forth part is about merger performance. In this part the principal and method of samples selection are introduced by detail, on the model which is created by considering comprehensive evaluation of enterprise financial data, the performance changes of the enterprises after being acquired are analyzed, in the meantime by calculating the benefits which are created after local enterprise being acquired by central enterprise the effects to stakeholders caused by merger are observed.The fifth part is about the performance of merger motivation. By considering local government characteristics, corporate governance structures and financial capacity the logistic regression model is created. On the model the factors which effect local government and enterprise in merger are performance, then the motivations why local government interpose merger are confirmed.The sixth part is about counterplans and advises. By studying the traits which basic on the case about central enterprise acquiring local enterprise the counterplan and advises are presented from the views of legal construction, industrial macroeconomic policy, merger efficiency and market mechanism.The seventh part is the summery of this thesis. The research perspectives and research findings are summarized, then the shortage of this thesis and the probable research fields are pointed out.The study results indicate that from the time when the ownership of local enterprise translated from local government to SASAC three years later the acquired enterprise's debt paying ability and operation capability doesn't enhance, however the profitability reduces continuously and merger effect limitedly on improving acquired enterprise's operation ability and financial position. But from the view points of local government the acquired enterprises'tax contributions, fee and employees increase progressively year by year, especially speaking the tax contributions increases obviously right on the year when merger take place. Basic on the fact that the enterprises increase employment opportunities and the tax contribution to local government after being acquired by central enterprises the merger has positive impact on local government's benefits.The results basic on the logistic regression model indicate that the indexes which have significant effect on target enterprises'merger are all enterprise indexes, for instance, the ownership structure and financial ability. In detail, whether the local enterprises could be acquisition targets has nothing to do with local governments'payments level and local economic level. The less state-owned shares and negotiable shares local enterprises have the easer they become acquisition targets. The larger shareholding ratio the majority shareholder gets the easer the local enterprises become acquisition targets. If enterprises growth potentiality is good they could keep their independence, good profitability and low debt ratio are positive factors about being acquired, and the enterprise with high return on assets have high opportunity in being acquired. Enterprises'financial distress and operation ability have little effect on their possibility of being acquisition targets. Whether an enterprise should be acquired have small relation with the industry they belong. The main reasons why local government motivated local enterprise to be acquired by central enterprise are country industrial policy and the corporate health of local enterprises. According to the tow reasons fellow five counterplan and advises are given. First with the strengthening governments'functions in economic management direct intervention in merger should be replaced by legal means. Second merger and acquisition between enterprises need to be standardized by industry development strategy. Third central enterprises could be stronger and larger by increasing merger efficiency. Forth regarding the financial effect of being acquired the garget enterprises'increase in value must to be part of acquisition purpose. Last acquisition market mechanism need to be established by increasing the marketing level of state-owned enterprises acquisition.