Empirical Research Of Market And Operating Performance Affected By M&A

With five waves of corporate mergers and acquisitions in the world, mergers and acquisitions of Chinese listed companies will maintain high growth in the future and lead the sixth wave of mergers and acquisitions. It had a few disadvantages that most studies made market-to-book ratio as a whole to be the proxy variable for the company’s future growth opportunities. We decomposed market-to-book ratios into misvaluation and growth option components, then established three regression models. We explored target stock misvaluation and growth option components on the short-term market reaction, long-term market performance and long-term operating performance. In this paper, we set CAR as the proxy variable for the short-term market reaction which between a day before the declaration date to the day; BHAR as the proxy variable for the long-term market performance which between 24 months after; ROA as the proxy variable for long-term operating performance. According to the research, we reserved 24 months as long-term market performance BHAR and operating performance ROA reaction period. The control variable OWC and OWP are published in 2003, and the publish time of the samples is in April next year. In order to avoid the look-ahead bias, we made the research range in January 2004 to December 2013.The regression results showed that the target stock misvaluation had no significant effect on the bidders shortterm market reaction, but had a significant positive impact on the bidders long-term market performance. Target growth option components had a significant negative impact on bidders long-term operating performance. Thus it recommended that the government should adjust its role in mergers and acquisitions and improve relevant laws; Bidders managers could use misvaluation properly to increase long-term market performance.