Research Of The Market Reaction On Public Companies’Mergers And Acquisitions

Merger and Acquisition(M&A) is not only an important means to achieve rapid expansion and integration, but also a way for the capital market to achieve efficient allocation of resources. In mature economic market countries, Mergers and Acquisitions began in the second half of the19th century, the United States has experienced five large merger waves, but showed a declining trend. The history of our country’s M&A began in early1990s, since then M&A has presented a picture of prosperity and specification. The number of transactions and the transaction amount reached a new height while there was a weakened trend in the world situation. With China’s deepening reform of non-tradable shares in2005, liquidity of capital market has been more further enhanced and M&A activity has been injected new vitality. Coupled with the new company law, financial securities law and the acquisition management of listed companies have been promulgated and implemented, legal obstacles of company mergers and acquisitions will be eliminated, the external market environment of mergers and acquisitions would be more perfect, M&A mode and transaction characteristics differ from the past. Mergers and acquisitions of China’s listed companies enter a new height period. Therefore, the study of listed companies M&A activity in the new situation has important theoretical and practical value.The study of M&A in developed markets has already been relatively mature, most of foreign scholars use short-term event study method to analysis the market abnormal returns before and after the merger announcement. While our scholars study from abroad have also published a series of papers with the actual situation, mainly are about value creation and the Merger and Acquisition market response. Because of the special background of domestic securities market, early scholars use more financial indicators to study M&A performance. With the market’s well developing, the use of event study has been increasing but still limited and fewer papers based on different types of mergers and acquisitions. This paper use Event Study model to calculate the short-term Cumulative Abnormal Return and market reactions to different factors.In this paper, the abnormal returns are studied respectively for M&A events occurred in A-share market during the year2009to2013from CSMAR database by using event study, combines grouping inspection with multiple regression analysis to identity factors influence M&A performance.The structure and conclusions of this essay is as following:Part Ⅰ:including the meanings, backgrounds, research approaches and innovations of this essay.Part Ⅱ:defining what M&A is and introducing the relative theories about the motivation of merger and acquisition.Part Ⅲ:domestic and foreign literature reviews about M&A.Part Ⅳ:based on empirical research, this essay defines the time window of sample data as (-20,20) day, and researches market reactions. The main conclusions are as following:(1)From the overall sample, M&A events can truly impact the stock price in short-term. Especial before the announcement of M&A events, market could appear abnormal changes which will last5days after the events announced.(2) According to the factors which affect the market reactions by M&A events, this essay uses group research methods. By the analysis for the six important factors (company nature, insider trading or not, payment mode, related party transaction or not, number of analyst, and share holding ratio by shareholders), it indicates that investor pay more attentions on payment mode. When listing company pays the M&A by stock rights, stock price would begin to increase before the announcement day and reach the peak until five days later from announcement day, and the accumulated abnormal earnings even reach12.54%. Moreover, for the merger and acquisition, investors have interesting in the related party transaction. In addition, market has positive reaction for M&A events by private enterprises and has negative reaction for state-owned enterprises. Also, investors are sensitive for the insider trading and have more interesting for the low-level insider trading. Furthermore, market has negative reaction for the companies which have more following analysts, but has positive reactions for less following analysts companies. Based on the group research through top ten floating stockholders’holding ratio, the company which has a high holding ratio will get more positive market reactions for merger and acquisition event.(3) According to Multivariate regression analysis of accumulated abnormal return, we can see a positive correlation between pay-method dummy variable and accumulated abnormal return; Moreover, relative trading dummy variable in the whole sample of abnormal return also can be regard as a positive correlation, this impact will occur after M&A. In general, variables of insider trading has negative impact on abnormal return; however, depends on Multivariate regression analysis, we can see that insider trading variable has a positive impact on returns before media release. These differences impute to the negative responding after public release. Firm-natural dummy variable have a negative impact on abnormal return which means state-owned enterprise and accumulated abnormal return is negative correlation but compare with accumulated abnormal return and private enterprise is positive correlation. After release M&A information, if analyzers track more stocks but the abnormal return is negative that means investors do not have good expect on this M&A. Thus, the higher shareholding ratio of top10liquidity stocks the greater accumulated abnormal return which has been predicted in this text, moreover, the higher shareholding ratio can provide a prudent decision and investor will more confidence with this decision.Part Ⅴ:Summary of this article’s empirical results and interpretation of the results.