Indentifying Targets Of Merger Arbitrage

With the rapid development of capital market in China, merger and acquisition which occurred in listed company becomes more and more active. Making profits from standard trading instead of insider trading have become reaching an agreement. Merger arbitrage have become more and more attractile for investors.Therefore, correctly identify targets with arbitrage ability have become more and more profitable.Former researchers who focus on this area only research within short period, and lots of them just focus on the characteristic of M&A targets not the arbitraged targets. When selecting variables also have limitations that lots of them rarely involves the industry characteristics and policies supporting factor, and when construct model, researchers like to use one-year model or mixture years model without considering stability.This paper selects full samples of2006-2012in A shared market of China, added industry and policy factors, meanwhile use3years data to find out stability characteristics, and finally find out the stability characteristics which can help us to search for the arbitrage targets.We get the following conclusions:(1) By the research on the characteristics of control right shifting in2006-2012in A shared market of China, we find that these companies have the characteristics of poor profitability, poor solvency, poor working and so on which are the characteristics of shell company.(2) With one-way ANOVA,we find out that the industry factor cannot be ignored, but the policy factor is not remarkable;(3) when use3years data to find out the characteristics of arbitraged targets, we find that these results focus on profitability, cash flow indicator, per share indicator and debt paying ability;(4)There exists stability characteristics which can help us to find out the arbitraged targets, that’s EBIT/ASSETS, ROA and EPS and all of them have negative influence on arbitrage.