Inter-province Political Connections And Inter-province M&A

With the rapid changes of economic environment,enterprises not only need to integrate and accumulate internal resources,but also need to rely on effective external expansion to realize their growth and development.As a commonly-used way in the process of expansion,M&A gradually becomes an important choice for enterprises to highlight their competitive advantages and achieve their strategic objective.In recent years,M&A market is more and more active and has an obvious tendency for interprovince M&A.More and more enterprises want to achieve inter-regional capital flows through inter-province M&A.However,nowadays our country's regional economic development is highly unbalanced,and legal protection degree differs in different places,and the phenomenon of market segmentation is universal,so it's not easy for enterprises to carry out inter-province M&A activities.As a link built between enterprises and government departments,inter-province political connections are possible to help enterprises to break through the regional barrier for M&A and provide enterprises with a necessary way to carry out inter-province M&A activities.At present,the research on political connections and inter-province M&A is not enough.The existing literature available mainly investigate its influence on inter-province M&A on the overall level of political connection,and rarely pay attention to the relations between political connection with specific type and enterprises' inter-province M&A.Different political connection types have different features,so we cannot take them in the lump.To enrich the above-mentioned research,this paper studies the influence of inter-province political connections on enterprises' inter-province M&A behaviors and their performances.It mainly discusses the following problems: one is whether inter-province political connections promote the occurrence of enterprises' inter-province M&A,the other is the influence of inter-province political connection on the performance of enterprises' inter-province M&A.This paper is divided into six parts.The first part is introduction,including the research background,the research significance,the research frame and the innovative points.The second part is literature review,according to the relevant literature of political connections,M&A and M&A performance,the paper generalizes the conception and measurement of political connections.Secondly,this part summarizes the theories of M&A,Thirdly,this part focuses on the influence of political connections for enterprises M&A,and briefly reviews the existing literature.The third part is the theoretical analysis and hypothesizing.This part proposes the interrelation between the inter-province political connections and inter-province M&A basing on the theories of M&A motivation,asymmetric information,rent-seeking etc.The fourth part is the design for the empirical research,including the selection of samples,the collection of data,the definition of the variables and the construction of the mathematical model.The fifth part is the analysis of the empirical results,with six empirical steps,the distribution of samples,descriptive statistics,correlation analysis,multiple regression analysis,robust test and further research.The last part of this paper is the conclusion and recommendations,including the main conclusion from this research,the practical significance,the limitations and the future prospects of research.This paper selects the successful domestic M&A cases of China's A-share listed companies from 2010-2014 as the research object,and determines the initial M&A samples based on certain selection criteria.At the same time,on the basis of reviewing M&A announcements,manual collects and distinguishes the inter-province and local samples.Then,the Logistic regression model is established to inspect the relations between inter-province political connections and inter-province M&A's probability.Furthermore,in order to study the influence of inter-province political connection on enterprises' performance of inter-province M&A,this paper uses market model method to calculate the short-term performance of sample companies' inter-province M&A,and established regression model to analyze the relationship.Through the empirical research,the study obtains the following conclusions: firstly,the establishment of inter-province political connections indeed increases the probability of enterprises' inter-province M&A,it means the inter-province political connections promote the occurrence of inter-province M&A.Secondly,though inter-province political connections promote the occurrence of inter-province M&A,they obviously damaged the performance of inter-province M&A.The reason may be the differential advantage of inter-province political connections leads to enterprises' excessive M&A,reduces their resources utilization rate and ultimately damages their value.Thirdly,the wider the distribution of inter-province political connections,the higher the probability to carry out inter-province M&A,and the positive effect of inter-province political connections on the probability of inter-province M&A mainly reflects on private enterprises and government-controlled enterprises,while the negative effect mainly reflects on private enterprises.In general,this paper has found some relations between inter-province political connections and inter-province M&A.the findings theoretically enrich current researches on political connections and inter-province M&A,and also provide enterprises and government departments with important inspirations and political suggestions,details as follows: on the one hand,under the serious situation of capital market's segmentation,the establishment of inter-province political connections is indeed able to help enterprises to realize inter-province M&A and inter-province operation,but enterprises shall dialectically treat the influence of inter-province political connections on their value,and shall not blindly use the differential advantage of inter-province political connections to make excessive M&A.On the other hand,our country shall continuously perfect market mechanism and promote the process of marketization,reasonably define governmental functions,reduce the intervention of government on the market,improve capital market's resources allocation efficiency,perfect the legal system and lead enterprises to grow and develop in favorable market environment.