Mechanism And Empirical Validation Of Position Right On Characteristics And Performance Of State-owned Enterprises M&A

With the development of Chinese economy and society, M&A has become a shortcut to the rapid growth of China’s enterprises. M&A, as an important way for the allocation of resources, gradually plays a vital role in the reform of state-owned enterprises and the strategic restructuring. But at present, the “internal control under government intervention" is still one of the basic characteristics of governance structure in China’s state-owned enterprises. In state-owned enterprises, there exists a common phenomenon of double agent- business agent and state agent. By adopting the combination of mathematical analysis and empirical research methods and based on the dual business agent and the national perspective, this paper analyzes motives, features and impact on corporate performance after M&A of management and government officials’ right of the state-owned enterprises.Firstly, based on the principal- agent theory and the hypothesis of agent utility maximization, the paper builds the utility function model of the management and the government officials. With mathematical analysis, results can be concluded. Firstly, as the management can benefit from their internal control right, they are inclined to expand the scale of M&A in state-owned enterprises. But when they have gained remuneration related to operation performance, the scale of M&A is more likely to be reduced. Secondly, government officials set enterprises’ target profit function into their utility function model. In order to achieve their political interests, government officials are more likely to interfere with the M&A of the state-owned enterprises to find target acquisition in local enterprises. Thirdly, the great the coefficient of the management of internal control rights is, the lower the level of state-owned enterprises performance; the higher the proportion of state-owned shares, the lower the state-owned enterprises income level is. Secondly, through the empirical research, there reaches the following conclusions: firstly, management’s control right is positive related to the scale of M&A, and is not in significant relation with the area of M&A; secondly, government officials’ right is positively related to the scale of M&A of state-owned enterprises and is also in significant positive correlation with regional; thirdly, management and government’ right are negatively correlated with M&A effects of state-owned enterprises. The results of mathematical analysis and empirical analysis present that although management and government officials actively push the M&A of state-owned enterprises, there is no promotion of company’s effects after M&A.The paper suggests that a close attention should be paid on opportunistic behaviors of government officials and enterprises’ management in M&A; state-owned enterprises should improve corporate governance mechanism and the incentive evaluation methods; the government should implement strict supervision to government officials, the enterprises’ management and M&A of state-owned enterprises...