The Bull Market And Bear Market In The Merger And Acquisition Performance Comparison Research

In the United States, listed companies’ merger and acquisition have a very long history. Foreign scholars have conducted many meaningful researches and conclusions. In China, the history of merger and acquisition is not long, but there have been many scholars studying on merger and acquisition performance deeply. And they also make many significant conclusions.This paper tries to study the performance of merger and acquisition from another perspective, comparing the different performance of merger and acquisition under bull market and the bear market which is different from the existing domestic literature. The study finds that in the short term, merger and acquisition in the bull market significantly outperform the merger and acquisition in the bear market. However, it is opposite in the long term according to the findings of this paper. This result remains significant after controlling some of other variables which might affect the performance of merger and acquisition. What’s more, the significance improved a lot.The author tries to explain the short-term performance difference according to the different sensitivity of M&A scale. I find that the different performance in bull and bear market in the short term is mainly due to the investors’emotion and overreaction. At the same time, the author tries to apply timing theory, managerial herding theory and Tobin’Q theory in explaining the long-term performance of M&A under different market status. At last, the author finds that Tobin’Q theory is capable to explain the phenomenon.When studying the other variables, I find that unlike western market, Chinese investors don’t pay much attention to the methods of payment or other transaction characteristic. I attribute this phenomenon to China’s M&A market supervision and the share issuing system. For the company management and corporate governance variables, I find that the ratio of free cash flow for the firm and propping dummy variable are significant when examining short-term performance, while leverage level and propping dummy variable are meaningful in the long term. And these results are basically the same with the former western literatures. As for the corporate valuation variables, I find that PB ratio, market value and pre-annual stock return have limited explanation to both short-term and long-term performance.