Effects Of The Ultimate Owner Of Listed Companies On Acquisitions

M&A has been in full swing in China. A myth spreads in the stock market–‘Restructuring can help companies out of woods’, but the myth just is a myth. Withthe media exposure, it’s known that a number of private enterprises appear on themarket through false merger and some governments control the merger andreorganization of listed companies to shift high-quality transmission assets of listedcompanies. As a result the listed companies have lost the support for manufacturingoperations, and their performances step by step down. With the China SecuritiesRegulatory Commission and the Shanghai and Shenzhen exchanges strictly inspectors,listed companies funds misappropriated, security breaches and other cases weresurfaced, such as ‘TOP case’,‘Jiangxi Kelon’,’Wuliangye case’ and so on. Finally theoperators behind the manipulator are not the directly shareholders of the listedcompanies, but also its ultimate controller. From the normal process of corporatestrategic goal, some mergers and acquisitions do not occur, but they were. It is just tomeet private earnings of the ultimate controllers of listed companies.This paper studies those issues mentioned above as a starting point. The authorssummed up the results of previous studies, combining the evaluation system releasedby the State Council, and then establish an evaluation model to measure enterprisecomprehensive M&A performance of listed companies. Then based on theoreticalanalysis, the author propose the assumptions and pick up variables to establish therelational model between control right characteristics of ultimate owners in the listedcompanies and M$A performance, to explore ‘how the ultimate owner affects theperformance of listed companies in mergers and acquisitions’. Base on acquisitionssamples of stock market in2007,2008and2009, the paper filters351listedcompanies as a research sample, found that with the ultimate control increase, M&Aperformance showing the characteristics of U-shaped curve. At the same time, M&Aperformance has been reducing with the deviation between cash flow right and controlright, specially in the listed companies which not controlled by government. Moreover,the study has shown that the balance between other shareholders and the legal systemcan not effectively improve the performance of mergers and acquisitions,non-governmental ultimate owners are still hollowing out the companies’ value byassociated M&A. This study helps to analyze the paradox of mergers and acquisitions in China,further answer that whether the decline in M&A performance related with the the"hollowing out" behaviors of ultimate controller. Thus it helps to establish areasonable share structure to improve M&A regulatory system. In the face of theincreasing M&A activities in listed companies, how analyze the conspiracy ofultimate owner before the occurrence of the event, just finding out their movies, it hasgreat practical significance for the companies which launching the M&A, theinvestors, the stakeholders, the monitoring agencies and legislative bodies.