Empirical Research On The Volatility In The Stock Market Brought By Mergers And Acquisitions

China’s stock market has experienced a journey from small to large since20years ago when it was established. It plays an important role in the funds collection, resources distribution and state-owned enterprise reformation. As a component in the stock market, the quality of listed companies in essence determines the degree of perfection of the whole stock market. However, the growth of modem enterprises, especially multinational companies is based on Merger and Acquisition (M&A) in some degree. China has already become the second largest M&A market second to the United States in the world. The year of2013is China’s M&A year since the number of cases and transaction amount are the highest in the history. China is at the key point of transformation of economy and the new government expresses the unprecedented determination of transformation. Looking at the domestic and foreign economic environment at the same time, the world’s advanced countries’economy is gradually recovering which leads investors gain more confidence, the increase of domestic economy is slowing down, monetary policy becomes tighter and IPO is stopped. With support from government and the encouragement of policies, listed companies choose M&A to optimize asset allocation, expand scale, and make strategic transformation and structural adjustment, in order to become stronger.Most studies think the buyers of M&A have a large premium, but have not reached the same conclusion about the seller of M&A. Although some study partly based on Behavioral Finance, the empirical studies are too rough and the conclusion is not targeted. Many studies have found that the stock market reacts to M&A, that is to say, M&A will bring volatility. But how the volatility and what are the determining factors are still controversial issues. The paper think the sentiment of investors have corresponding reaction and change before and after which will leads investors make some decisions which affect stock prices. Talking about the M&A year of China, the how stock market reacts to M&A and what factors influences the reaction are concerned topic. As IPO restarts in2014, the companies’decision makers are concerned about how to make the company have a better performance and more long-term development. Those are the value in the academic and practice of this paper.Thus, this paper tries to solve the following questions. The first is to explore the influence brought by M&A of listed companies in stock market. The second step is to explore and analyze the factors of the influences. Based on this, this article’s ideas are as follows. First of all, analyze the existing related literature research and provide basis for empirical theoretically.Starting from the definition and motivation of M&A, combined with our actual situation to choose the traditional factors. At the same time, analyze the impact of investors’sentiment from Behavioral Finance. Finally, the author gives some suggestions to listed companies, investors and regulators respectively.For purpose of research, this paper mainly uses the following methods.First, do literature research. The author classifies the different conclusions of the impact brought by M&A in the stock market and analyzes the factors behind. Then the author reviews the literature about the investors’sentiment and the stock market focusing on the influence in the new media environment. Finally, from discuss the existing results, the author find some deficiency and nutrients.Second, combine theory and practice. Starting from the motivation of M&A and the theory foundation of stock market changes, we analyze the traditional factors of the influence mechanism of the stock market. At the same time analysis the relationship between insider trading and stock market move. On this basis, the method of selection and research hypotheses are put forward.Third, combine of qualitative description and quantitative analysis. We use statistical analysis to check the influences brought by M&A and build models to do quantitate analysis.The main conclusions are as follows.First, M&A brings volatility in the stock market. Calculated abnormal return (CAR) is negative from six days before event day to fourteen days after.Second, M&A based on assets bring positive effects to the stock market; ones based on equity bring positive effects to the stock market. This can explain the differences among so many researches to some extend and it is an innovation. Third, insider trading exists. It is not particularly evident, but also harms the interests of most of the non-insider personnel and is not conducive to the health of market.Fourth, factors’ contributions to the M&A of listed companies are not consistent. Payment and MB do not affect the stock market as others. Industry, share ratio of the largest shareholder, connected transaction and investors’ sentiment has significant impact on stock market volatility.Fifth, investors’sentiment has positive correlation with CAR from the results of empirical analysis. That is to say, when the degree of investors’sentiment is high, they will make more investing decisions which will be inflected in the stock market through the volatility.Compared with the existing research, the possible innovations are mainly the following points.First, we put forward a theoretical framework of abnormal fluctuation in the stock market by bringing in the investors’sentiment.Second, we divide the samples into2groups and find some different results.Third, we analyze the factors of the influences and show the remarkable effects brought by investors’sentiment.Due to the author’s ability and knowledge is limited, this article has some deficiencies. First, the choice of proxy of investors’sentiment needs to be discussed. The Baidu Search Index is an indirect factor which cannot reflects investors’sentiment directly. Second, some noises cannot be ignored.After the above analysis, the author puts forward relevant suggestions for listed companies, investors and regulators respectively. For M&A event study, we can analysis different effects of different samples based on other classification, such as separate different industry groups to make the conclusion more targeted. On the basis of existing research conclusion, the author thinks that proxy for investor sentiment remains to be further thought.We can draw lessons from the domestic and foreign relevant results and compare different investor sentiment proxy variables in order to better maintain stability of the stock market in China.