A Study On M&A Performance Of Listed Companies In China Based On The Effectiveness Of Internal Control

In the deepening of economic and financial globalization and the raidingdevelopment of science and technology, enterprise managers are more deeply aware ofthat relying on their own internal expansion to a certain extent they will have to makesome kind of M&A to optimize their efficiency of allocation of resources. M&A hasbecome an effective manner to increase the global competitiveness of company, and italso becomes an inevitable choice. However, many of our company did not achieve theideal target in M&A, even some M&A bring the company operational difficulties. Sohow is the M&A Performance of China? Can M&A activity bring Chinese companiesthe benefits or not? In order to solve these questions, we make a study on M&Aperformance of listed companies in China.In this paper, the starting point is different from the previous researcher, and westudy on M&A performance of listed companies in China based on the effectiveness ofinternal control. Because internal control has become an important means of companiesto achieve their business objectives, to protect the safety and integrity of assets, and toensure the accurate and reliable of accounting information. Internal control has becomemore and more important of our businesses and managers, because the level of internalcontrol effectiveness has become an important standard measure of corporate value.We select98M&A events of china main board in2008as samples, whichincluding67M&A events as acquiring companies and31M&A events as targetcompanies. According to the topic of “A Study on M&A Performance of ListedCompanies in China Based on the Effectiveness of Internal Control”, we determine theevaluation indicator system of internal control effectiveness, in which there are5first-grade evaluation indicators and25second-grade evaluation indicators. Thenaccording to the practical condition of each index’s effectiveness, we make scores of theevaluation indicator system. At the same time, we use the Entropy Method to determinethe weights of every evaluation indicator and score on the date of the companyinformation. At last, we use the Multi-Level Fuzzy Comprehensive Evaluation Methodto calculate the score of the internal control effectiveness of the companies and analyzethe M&A performance of the acquiring companies and the target companies.The empirical results show that: After the M&A activity, the internal controlsystem of the target companies has been made a large degree optimization and their management level have been significantly improved. However, the internal controleffectiveness of the acquiring companies after the M&A activity doesn’t immediatelybeen optimized and some evaluation indicators of the acquiring companies even have adownward trend. Until the second year after the M&A activity, all the evaluationindicators of the acquiring companies become significantly increased, and their internalcontrol system is significantly improved.