Ownership Advantage,Relative Scale And Acquisition Premium

M&A is often seen as a rational choice, which can enhance corporate’s value, maximize shareholder’s value, and increase management’s performance. However, the acquiring company usually pay a high premium to obtain the control rights of the target company, so that it fails to achieve the expected performance after the merger. Scholars have studied the acquisition premium from the angle of M&A synergy theory, signal theory, agency theory, behavioral theory, asymmetric information theory and major shareholder personal gain, etc. While this paper researches the main reason of the acquisition from the perspective of acquiring company. Companies will continue to accumulate resources to build their own advantages in the development process, but because of the imperfectly competitive market, the external transaction cost is very high, so the company will adopt the internalizing way like mergers and acquisitions to advance economic activities, and in order to hold this advantage, the company will pay a premium. On that basis, this paper introduces the theory of ownership advantages, and studies its possible impact on the merger premium, in the meantime ownership advantages also has relativity because of the size of the target company, so this paper uses the relative size as the moderator variable.The paper adopts the research methods of normative analysis and empirical analysis, and selects the M&A events between2003-2013Chinese listed companies as the sample. In the normative analysis, the paper summarizes and defines the ownership advantage, relative scale and acquisition premium. Lundan(2008) divided ownership advantage into asset-based ownership advantages, transactional advantages and institutional advantages, this paper combines with the research of Shenghuan Yin(2004,2005) on the basis of theoretical analysis, measures three advantages with technical capability, marketing capability and financial capability respectively. At the same time, the paper puts forward the research hypothesis analyzing the impact that three abilities had on acquisition premium. In the empirical analysis, the paper measures the relationship between the variables after descriptive analysis, correlation analysis and regression analysis, and concluded:(1) The acquiring company’s technical capability is positively correlated with acquisition premium. The acquiring company often adopts the internalizing way like mergers and acquisitions to maintain the advantages of technological capability, so the company is willing to pay a relatively high premium to achieve its goals and avoid external high transaction costs, but it does not rule out the possibility of management arrogant paying the high premium.(2) The acquiring company’s marketing capability is positively correlated with acquisition premium. The acquiring company increases the competitive advantage by transaction in the market, with high time and economic costs, so the company is willing to pay the premium during the acquisition, but it does not rule out the possibility of management arrogant paying the high premium.(3) The acquiring company’s financial capability is negatively correlated with acquisition premium. The acquiring company with good financial capability is cautious during the acquisition, it will reduce the financial risk and acquisition cost as much as possible using its own financial advantage, lowering the acquisition premium.(4) The greater the relative scale, the more premium acquiring company with strong technical capability would pay, the less premium acquiring company with strong financial capability would pay, but relative scale has no regulation to the acquiring company with strong marketing capability.