M&A Performance Study Based On Different M&A Motives Of Listed Companies

As an important mean to redistribute resource on the capital market, Acquisition has a remarkable influence on company development, and it has been becoming a popular search field in corporate finance in recent years. Because of the complexity of acquisition, distinguishing different motives will be very important to the research of the performance of acquisitions and relative issues.Using a sample of public firms that have taken part in acquisitions during2007-2008, we investigate acquiring firms’ CAR during the period of merger announcement. Empirical results show that about half of the acquiring firms’ CAR are negetive, meaning that M&A is not entirely to optimize resoure allocation, there may be the manager’s agent motives to gain private interests. Then we develop a discriminat function which contains acquiring firms’ CAR, ex-ante accounting information and firm characteristics to subject the acquiring firms to multiple discriminant analysis.Empirical results show that synergy-motivated acquisitions associate with an average increase in the following years, meanwhile,agency-motivated acquisitions associate with a decrease. Results indicate that synergy-motivated acquisitions out perform agency-motivated acquisitions in the following years. But the result is not outstanding in the long term,showing that synergistic effect is difficult to play a role In the current market environment.Our research indicates that, on average, acquisitions do not creat value. By implication, acquisitions are pursued at the expense of the acquiring firm rather than in the interest of the acquiring firm’s shareholders. Identifying the motive for the public company acquisition will be beneficial for more effective supervision, higher efficiency and more favorable operation on capital market.