Impacts Of Capital Structure And Market Timing On Payment Method Of Merge And Acquisition

Since 2013,China's mergers and acquisitions(M&A)market began to perk up.The figures of M&A market,no matter the number or the amount of transactions,has been breaking records in each following years.For each enterprise or company,M&A is a very important part in their business activities and strategies.As an essential part of an acquisition or takeover,how to choose the payment method is influenced from transaction size,capital structure and market performance of the acquirer,control rights of both side and so on,which in turn will also influence many aspects of acquirer's operating and business in the future.Therefore,this paper studied the influence of payment method of mergers and acquisitions in Chinese A stock market,to explore how do the capital structure and stock price of listed company impact the choice of payment method in transactions.Firstly,this paper has reviewed the domestic and foreign literature of fundamental viewpoints and study outcomes regarding to capital structure,market timing theory,and their influence on the choice of payment method,and proposed the research hypothesis accordingly.In the section of empirical analysis,this paper has taken mergers and acquisitions of listed companies between 2014 and 2016 in China's A stock market as samples,using deviation between actual and optimal leverage rate which is obtained from dynamic capital model,indicator of market timing and their interaction term to study the impacts of capital structure and stock market to the choice of payment method.The following important conclusions have been worked out during the research process.(1)If the actual leverage rate is far higher than the target leverage ratio,leverage deviation has a positive impact on the stock payment.That is to say,the corporate is highly motivated to improve and optimize the capital structure during the mergers and acquisitions when its leverage rate is too high.(2)If the stock price is significantly higher than usual when corporate planning a merger or acquisition,stock is more likely used to pay the transaction.(3)When the stock price is significantly higher than usual,the corporate has stronger motivation to adjust its capital structure,while in other times,the corporate does have motivation to adjust its capital structure,but far more less than when the stock price is significantly higher.