Intra-industry Effects Of Listed Company Mergers And Acquisitions

With the China Securities Regulatory Commission issuing a series of policies to encourage merger& acquisition, the securities market is in a prosperous period of M&A. The large-scale M&A will have great influence on the securities market, which should raise concern of investors. However, domestic studies of M&A mainly focus on the effects of M&A on the company itself, and there are few researches on the intra-industry effects of M&A. This paper studies the impact of a M&A event on the other companies’ stock returns in the same industry by studying two representative forms of M&A-horizontal merger and backdoor listing which have happened from 2008 to 2015. By means of event study, this paper sets the initial announcement date as the event date, and then calculates the CAR of different event windows. The results of this study show that the intra-industry effects of horizontal merger are not statistically significant, but the industry effects of backdoor listing are significantly positive.This research sets multiple regression models to figure out the reasons of the results. The intra-industry effects of horizontal merger are studied by competitive model, information model and mixture model. The intra-industry effects of backdoor listing are studied by competitive model, attention model and mixture model. The results of the regression models show that positive information effects and negative competitive effects result in the insignificance of the intra-industry effects of horizontal merger. The positive information effects result from the anticipation of increasing probability of rivals in the same industry to be target companies. The negative competitive effects result from the anticipation that M&A would improve the efficiency of the event company and thus would make the industry structure change and the profit of its rivals decline. While the positive intra-industry effects of backdoor listing are all due to attention effects, and these attention effects are more pronounced in industries characterized by better performance and high turnover ratio. What’s more, a backdoor listing would cause fewer significant attention effects if it is not the first new stock issuing event in 3 months. This result may infer that the investors regard the backdoor listing as a speculation rather than a new stock issuing. The paper also infers that investors have confidence on the performance of M& A in Chinese securities market, but the react of Chinese investors on the industry impact of the M&A is less and more hysteretic compared with the mature securities market. In the end, the paper offers the investors and administrators of the securities market some suggestions according to the research results.