The Analysis Of The Effect M & A Has On Chinese Target Company And The Influencing Factors Of It

As an important form of capital operation, M&A could be a quick way for companies to expand in size and reinforce their market competitiveness. M&A has been developing for more than one hundred years in the western market, while its history in China is far shorter, but it also made a big stride in China market over the past decade. In theory, M&A might have positive influence or negative influence on individual company and even the whole social economy, so whether the M&A can really create value or improve performance for companies in practice and what the factors influencing this effect are has long been a focus of the research relevant to M&A.Researchers in China have done a lot of work on the research relevant to effect of M&A and the factors that impacting this effect and obtained significant accomplishment, but the difference existing in the way they measured the effect, the time when the M&A happen, the length for research period they chose and the direction they laid their emphasis had lead to lots of conflicts in their conclusions. With a couple of event such as the release of the supervision of M&A between listed companies,2006 could be regarded as a turning point of the development of M&A in China capital market to some extent, so doing some research into those M&A events happening after 2006 might make sense in evaluating the effect of M&A in China more objectively. Based on this, my paper focuses its research on the effect M&A has on target listed companies' financial performance and those factors influencing this effect. First of all, this paper analyze the change in the financial performance of 46 target listed companies over the four years next to the year when M&A happened during 2007; after that, this paper comes up with three premises relevant to the relationship between three factors and the effect of M&A based on Efficiency Theory and then test these premises with rank sum test and multivariate regression models.What this paper discover is that:in general, M&A improves the performance of target listed companies to a significant extent. Choosing the OPROA as the way to measure performance, this paper finds that performance of target listed companies during the four years after M&A are all better than the previous year. Besides that, the improvement in performance of those target listed companies with poor managerial efficiency before M&A, getting higher level of premium and State-owned equity transforming into Non-State-owned equity tend to be more significant.Considering the national condition of China and the fact that marketization merger might has some positive effect, this paper comes up with some suggestions based on the conclusion of research, including encouraging purchasing those companies experience managerial failure, creating favorable financing environment for M&A and encouraging the privatization of State-owned equity under certain condition.