An Empirical Research On Performance Of Stock Swap Between Chinese Listed Companies

Stock for stock, as a significant payment method of acquisition, this is its advantage which is not subject to the scale of fund that has always been the mainstream of acquisitions in the west. Nevertheless, china is a late starter in this field. It pioneers until Tsinghua Tongfang finalized a share swap with Shandong Lu Ying in1998. The policy of share swap in Chinese capital market was not gradually liberalized until "Administration of the takeover of listed companies procedures" put into practice. Enterprise listing as a whole and back-door listing appear frequently, which trigger thinking about whether share swap create value for enterprise. Domestic scholars have also carried out researches, but which mostly focus on individual case analysis. For the performance of share swap they did not conduct a systemic analysis. The results of researches also differ. Research scope is mainly limited in mergers and acquisitions between listed companies and unlisted companies. There is few research of alliance between listed companies to which capital market draws close attention. Therefore, this paper selects stock for stock among listed companies which domestic scholars rarely study. It adopts event study to analyze empirically the effect of stock for stock among listed companies on host and merger companies. On one hand, this paper supplement performance study of domestic share swap, on the other hand, it provides theoretical support and empirical basis for promoting alliance among listed companies.The main content of this article is divided into three parts. The first part is to develop and analyze relevant theories of share swap to certain extent. The author firstly analyzes advantages and disadvantages of share swap which compared with other acquisition payment. On this basis, it determines three principles in share swap decision:optimal capital structure, minimum capital cost, and minimum dilution of stock ownership. Besides, the measurements of exchange ratio undertake a comparative analysis, including Earnings per share, net asset per share. Secondly, the author analyzes the motives causing enterprises merger and acquisition, involving enhance the synergistic effect, enhance market power, gain strategy opportunity and lower market barrier, reduce agency cost and so on. On the basis of above reasons, this article further analyzes and explores the motives forcing share swap. It mainly contains the realization of equity division reform, overall listing and backdoor listings. Eventually, this article also studies the measurement of M&A performance.The second part is about stock swap performance model design and empirical test between listed companies in China. Model uses the above measurement method, Jenson law, to figure out the cumulative excess return in order to determine the size of the convertible M&A performance. Empirical data comes from China’s listed companies and declaring the short-term impact of the convertible mergers and acquisitions through30days’cumulative excess return rate (CAR) changes before and after on the merger, and determine the effect of long-term value of the convertible mergers and acquisitions through18months’ holding excess rate of return (BHAR) changes after the acquisition completed. The empirical results show that:both short-term and long-term, the convertible mergers and acquisitions between listed companies cannot create value for initiator.The third part analyzes the reasons for the low Convertible M&A performance between listed companies in China, and put forward some suggestions. Due to the late development of convertible mergers and acquisitions in China, the theory is not yet mature, and the exchange ratio is still considerable controversy, and the characteristics of big shareholders leading and administrative intervention is very obvious, so we must speed up the convertible M&A legislation, strengthen the supervision, and prevent big shareholders to damage the interests of minority shareholders; set reasonable premium levels to determine the exchange ratio, prevent excessive pay combination; finally abolish the administrative intervention, market-oriented, to truly expand the powerful combination of mergers and acquisitions between listed companies.