The Empirical Study For Performance Of Cross-Border M&As By China’s Listed Companies

As the economic globalization and integration continue to accelerate, cross-border mergers and acquisitions is expanding and becoming more popular in terms of scale and depth. The past20years, the wave of cross-border M&A kept spreading across the world. With the rapid growth of China’s economy accompanying upgrades of open-up, industrial structure, competitiveness of Chinese enterprises, multinational M&A for China’s companies is speeding up to consist with the pace of world. In addition, the global financial crisis brought new opportunities for Chinese enterprises set off a wave of Chinese overseas M&A worldwide. However, it is commonly known that opportunities and risks always co-exist; the performance of cross-border M&A is well below expectation in particular for Chinese enterprises, not to mention M&As with compelling synergy. For instance, the deals between CNOOC and Unocal, Chalco and BHP Billiton are ultimately ended in failure. Hence, the paper centers on cross-border M&A’s ability to generate revenue for Chinese companies, impact on shareholders wealth effect and test that timing, sectors as well as the nature of Chinese enterprises can be significant factors for M&A.At the beginning, this paper summarizes the concepts of cross-border M&A, introduces major valuation approaches and also discusses previous researches. Moreover, the paper further explains the rationales behind the valuation approach that previously introduced to lay the foundations for thorough analysis.Secondly, a briefing of cross-border M&A in motivation and history provides the study of M&A’s Empirically, the paper uses event-study approach to test the performance of M&A for listed Chinese enterprises as measure by market capitalization. It is found that although there excess return, that is insignificant. To make analysis clearer, the paper divides sample based on timing of M&A and nature of enterprise. The analysis suggests that the performance for pre-crisis cross-border M&A outweighs post-crisis M&A, mining sector joys biggest return following finance and insurance and also state-owned enterprise shows notable announcement effect. To study the long-term effect, GARCH model is applied. However, GARCH indicates that cross-border M&A’s impacts on stock price movement are temporary. The market behavior is determined by more fundamental and macro factor such as risk aversion, liquidity etc. performance a solid history background and realistic implication.