Government Intervention,Diversification M&A And Enterprise Risk

With the reorganization of assets of listing corporation and the improvement ofequity acquisition laws and regulations and the arrival of the full circulation times, thediversification merger phenomenon has appeared on China’s capital market stage, andthe problem of this emerging M&A of listing corporation value influence hasgradually become an important topic. At present, the domestic and foreign academiccircles dispute over the relationship between diversification strategy and corporatevalue. From the existing literature, whether domestic or foreign, academic circlesfocus on the discussion of the effect on corporate performance of those diversificationmergers, while it reflect the value of the enterprise, but which is not comprehensive.The excessive expansion of mergers and acquisitions may also bring enterprisemieding disaster even if they have good performance, but for the current risk influencewhich may produce of diversification merger has been discussed less. In addition, thelisting corporation diversification merger expansion behavior has some link to theeconomic consequences of the special institutional background in a large extent,what’s more, the latter will even play a decisive role of domination on the M&Aenterprises, so in order to further study the diversification of China’s special systembackground based on the M&A activities, this paper introduced the variable ofgovernment intervention to look for the cause, and try to solve the following twoproblems: First, how does the diversification of mergers influce the risk of enterprises;Second, what kind of impact will those diversification mergers be on the enterpriserisk when under the intervention of government.This paper takes those listing corporations who implement diversification mergerbetween2005and2010years as samples, studies the impact of diversification M&Arisk, and further analyzed whether there are differences between the effects onenterprise risk under different extent of government intervention. The paper collectedfive years data as the basis of empirical study, from the longitudinal angle, studies howthe risk changes before and after the diversification merger; from the horizontal angle,with the same period of industry and take those nondiversification M&A as a control sample, studies how the risk changes comparatively, and join the intervention ofgovernment as a moderating variable. Finally based on the two study, observingwhether the results wound have further implications. Empirical research found that:whether implement diversification M&A before or after the listing corporation itself,or with nondiversification M&A of listing corporation comparing, diversificationM&A activities were significantly increased business risk; in a role for governmentintervention, negative effects on enterprise risk is more significantly. The research ofthis paper enriches the understanding of economic consequences on diversificationM&A, and has some certain enlightenment function to speed up the equity divisionreform and the transformation of government functions.