Mergers&Acquisitions Can Ease The Company’s Financing Constraints

In the context of rapid economic development in today’s world, the wave of mergers and acquisitions is sweeping the world, and it is also an important way to become bigger and stronger for a country’s rapid economic development and corporate’s short-term performance, especially in China, the world’s economic development engine, this effect is particularly prominent. In the process of M&A transaction, enterprises’financing constraints is a worldwide problem in the M&A business, to a certain extent, the rapid development of worldwide M&A events accelerate the theory research on financing constraints and M&A events relationship. According to previous results, there is a strong correlation between M&A and corporate cash flow. However, M&A can ease the financial constraints to a certain extent, there is still a big controversy in the academic community, not yet formed a consistent view. Western scholars generally use the principle of the investment-cash flow sensitivity principle to study the relationship between M&A and financing constraints. While in China, expert’s relative research to ease the financing constraint for M&A is less, just on the fledgling stage, and It is only on the basis of Western, far-depth and detailed study of the Western academia, merely in the theoretical analysis the level. Moreover, domestic research about M&A and financing constraints, only draw the mature theory of the West, and not take into account the institutional background factors, and it also lack of data to validate the existing findings to apply to M&A market in China. Therefore this article uses empirical research methods, with the empirical method of linear regression, to analysis whether acquisitions can ease the financing constraints, which is the key issue to be addressed in this article.The paper set M&A transactions in2007-2010as the study sample, using descriptive statistics, correlation analysis, multiple linear regression as the main statistical methods, considering institutional background in China on the basis traditional investment model, focus on investigating the event that whether occurrence of M&A of companies can alleviate the financing constraints after the event happens. The major findings include:(1) the listed companies which suffer from M&A commonly exist investment and cash flow sensitivity.(2) to ease financing constraints is one of the main motives to M&A for listed companies.(3) the listed company can ease the financing constraints after M&A;(4) M&A eased financing constraints, and by degree the higher financing constraints enterprise eased the more constraints than the low financing constraints enterprise.The paper is organized as follows:First, in introduction we introduce the background and significance, theresearch objectives content, ideas and methods, some innovation points; Next, from two perspectives on financing constraints and M&A at home and abroad, we conduct a review of relevant literature; the third part focuses on the theoretical support of the paper; in the fourth section we describes research hypothesis, model building, variable selection, variable selection, etc; in the fifth part we introduces An Empirical Analysis research methods and robustness of the test with the multiple linear regression; At last we presents conclusions and policy recommendations.