Separation Of Ownership, Investor Legal Protection And Impact On Performance Of Corporate In M&A

In current capital markets, mergers and acquisitions has become an important measure forenterprises to expand the scale of corporation, into different areas or even get access to newtechnologies in order to improve R&D capabilities. So corporate mergers and acquisitionsgenerated more and more attention. In addition to the great gains in M&A, the tunneling andpropping phenomenon caused by the agency problems has been more and more attractive to thescholars: They start to pay more attention to the interests of small shareholders. Investors’ legalprotection of the impact of M&A is becoming more important. China is in a period of rapideconomic development, the occurrence of mergers and acquisitions showed an increasing trend,and most M&A activities have been tried and gradually in progress. In this case, the legalprotection of investors in mergers and acquisitions in China is very necessary.On the basis of research on M&A and Investor Legal Protection in China, this paper use215listed companies as samples, which occurred at least once a merger or acquisition in2007-2010, studied the relationship between the separation of ownership and firm performance. Theresults showed that: When degree of separation of ownership at a low level(SEPR<1.866),shareholder support the performance of the company, with the relative control right increasing,corporate performance will be improved in M&A; When degree of separation of ownership ata high level(SEPR>1.866), company shareholders tunneling. Greater the degree of separation,the lower the M&A performance. And regional differences, on behalf of legal protection ofinvestors, can make this relationship weak.This paper also research the relationship between legal protection of investors andcorporation performance in M&A in three aspects: spillover effect, bootstrapping effect,transaction costs and friction. Studies have shown that in both sides of M&A, improvement inthe level of legal protection of investors will inhibit invalid M&A decision-making, save theacquired company’s performance. But the spillover effect of the main square is not obvious;with the raising of the legal protection of investors in target company’s location, thetransaction costs and market friction will be reduced, so that the M&A performance willimprove; bootstrapping effect is obvious between target company and M&A side, The biggerdifference between target company and M&A side, the greater impact on the raising of theM&A performance because of valuation accuracy and the level of corporate governance.Studies have shown that improve legal protection for investors in China is the key point to avoid tunneling and propping, protect the interests of minority shareholders, and increase theperformance of M&A business.