A Study Of Foreign M&A’ Performance

Foreign M&A has experienced a repeated and zigzag development, since it firsttook place in1995. There is no doubt that foreign capital will bring advancedcorporate governance, technology and managerial skills into target companies.However in the same time a monopoly power might be caused, which will jeopardizeChina’s economic safety. Moreover due to the poor ability to encounter hostiletakeover, foreign M&A may prove to be a threat. Hence the questions about theaffects of foreign acquisitions on Chinese companies, i.e., whether it can improvetargets’ performance, whether it is superior than domestic M&A, which factors canreally effect its performance, and etc. These are all meaningful subjects waiting foranswers.In the study relevant theories and outcomes are first reviewed and then thepotential key factors behind the performance of foreign acquisitions after theoreticalanalysis. Then66listed targets took place between1995and2010are sampled.Adopting event study and accounting based study, the paper examines theshort-term and long-term effects of foreign merger respectively as well as itssignificance using nonparametric test. According to the result, in the short-termforeign share and control, and management share have a notable effect on acquisitionperformance; in the long run these factors continue except that the direction ofmanagement share has changed. Besides a comparative study between domestic andforeign M&A is implemented. As a result the market tends to have higherexpectations for foreign samples but in the long-term these two group exhibit nosignificant difference.Based on the analysis relevant political propositions are put forward.