Earnings Pressure、Internal Control And M&A

The existing domestic and foreign literature on mergers and acquisitions is extensive on mergers motive and M&A’ performance. Capital market hard constraints were regarded as the importat motivation of the enterprise merger, such as financing constraints. The literature from the perspective of capital markets is almost blank, which examine the effect of pressure felt by manangement to meet or beat analysts’ earnings forecasts on firms’ M&A decision. And the current research about external earnings pressure tend to be concentrated in developed countries. In recent years, China’s merger and acquisition activity is more and more active, the impact of securities analysts is also growing. Basing on background transition economy system in China, how does external earnings pressure impact on M&A activity? Taking into account implementation of internal control system and the dynamic role of senior management on the design, how does it impact on M&A activity?By analysis the data of the non-financial A-share listed companies in Shanghai and Shenzhen stock exchanges from 2008 to 2013, this study examines the effect of pressure felt by manangement to meet or beat analysts’ earnings forecasts on firms’ M&A behaviors. Further, we explore the relationship between earnings pressure and firms’ M&A behaviors based on internal control and managerial power views. We find that firms under such earnings pressure not tend to M&A,but internal control weaken the negative relationship between earnings pressure and M&A, compared with firms with lower quality of the internal control, fims with higher quality of the internal control under such earnings pressure are more like to M&A. Specifically, this phenomenon will become more apparently when managerial power is dispersed inside a firm. This results indicate that during the transitional period, it has important theoretical value and practical significance to clarify the relationship between earnings pressure and firms’ M&A behaviors and the governance mechanism of this relationship.