An Empirical Study On The Predictability Of M&A Targets In China Lested Companies

With the rapid development of China’s capital market, mergers and acquisitions of listed companies are increasingly active. The identification of M&A target firm has important implications for investors, acquirers and managers. The previous studies of predictability in M&A target firm use less samples, without considering the impact of industry differences. Just use one year or a few years to test the accuracy of model.This paper selects full sample of2001-2010in China’s listed companies, build the prediction models each year. The prediction models to be tested by next year’s samples. Through the change of model and indicators, we can make a relatively comprehensive, systematic and objective analysis in the predictability of M&A target firms. We get the following conclusions:(1) M&A target firm have the characteristics of poor profitability, poor solvency, poor working, poor ability of growing and getting cash, small-scale. These characteristics have a strong explanatory power of alternative.(2) With one-way ANOVA we find that the split share structure reform affects the characteristics of M&A target firm, which have dispersed ownership before.(3) The prediction models can predict M&A target firm to some extent.(4) The prediction models of year by year samples are more stable and fitted well. The stable indicators in the prediction models include total assets, net number, the net cash flow generated from operations, the net of net profit after non-operating gains and losses and working capital, the coefficients of these indicators are negative.(5) The prediction models of year by year samples are not obvious affected by macroeconomic factors. We can find that the increase in the number of modeling samples can effectively reduce the impact of macroeconomic factors.