Whether M&a Create Value For The Buyer's Enterprise?

Accompanying with the marketization and internationalization of China’s economy, as well as the maturity of capital market, mergers and acquisitions events are surging recently. The mergers and acquisitions is of great significance in terms of micro-economy such as strengthening the industry concentration, improving enterprise’s core competitiveness, realizing diversification as well as promoting innovation and industrial upgrading. In this context, the in-depth study of profitability of M&A is of important and urgent practical significance. Chinese capital market has experienced20years’ development, accumulated plenty of M&A data and cases. Those cases and the achievement in M&A research area by foreign scholars make it possible to quantative analyze the profitability of domestic M&A events.In this paper, the short term and long term gains are studied respectively for533M&A events occurred in A-share market during the year1998to2009by using event study method.For short-term gains, we prove that cumulative abnormal return of acquiring firms is significantly positive around M&A announcement day. We also indicate that there is a strong correlation between the short-term performance and book to market ratio as well as relative size, while the correlation is not significant between the short-term performance and size of acquiring firm, Tobin’s q value, ratio of equity acquisition as well as free cash flow.For the long-term performance, using Fama and French three-factor model, we indicate that the average monthly abnormal return of acquiring firms is positive during one year after the date of M&A announcement. We also prove that there is a strong correlation between the long-term performance and book to market ratio, Tobin’s q value as well as free cash flow, while the correlation is not significant between the long-term performance and size of acquiring firm, ratio of equity acquisition as well as relative size.