This paper studies the effect (market reaction and operating performance) ofmergers and acquisitions (M&A) with different types in the China’s capital market.The author divides the M&A happened from1998to2010into three categories(horizontal M&A, vertical M&A and conglomerate M&A), examines and comparesthe effect of M&A of the three types. Meanwhile, because other researchers foundthat China’s capital market, where a lot of inside behavior took place, is not asstandard as foreign market, the author makes2007a cut-off point in which year"Administrative Measures on Information Disclosure by Listed Companies",hereinafter referred to as “the ACT”, was put into force, and to compare the marketreaction of M&A before and after2007.In the paper the author finds:(1) the market reaction to M&A is not consistentwith the operating performance of M&A.(2) Overall, the market reaction to M&A isnot obvious. However, before2007, the market reaction is pretty much more active toM&A. The shareholders of the bidding firm benefit then, but after2007the gainsdisappeared. And before2007, early response of the share price to the announcementof M&A is obvious and after2007this phenomenon improved which means “theACT” is working; About the three types: the market reaction to conglomerate M&Ais the most active one while horizontal M&A is the worst. Specifically, conglomerateM&A improves the market value of the firm, the CAR of vertical M&A is negativeand very small, and the shareholders of horizontal M&A do lose.(3) The operatingperformance of the bidding firms declines a bit in the very year which the M&A tookplace, then ascends in the followed two years, declines in the third year, which showsthat M&A do not improve the performance of the bidding companies at all; For thethree types, the trend of the performance of horizontal M&A is the same as theall-sample while the other two is opposite. Comparatively speaking, the changes ofthe operating performance is most obvious for vertical M&A, of which theimprovement is great when integration is done, the performance does not enhance inthe long term for horizontal M&A, and for the conglomerate M&A, the change is notclear. |