A Study On M&A Performance Under Political Connections

Nowadays,mergers and acquisitions turn out to be one of the most efficient ways for enterprises expansion strategies and for adjustment of industrial structure.Since 2011,the quantity of mergers and acquisitions has increased enormously.The same goes on with the transaction amount.Moreover,with the upcoming reform taken in the state-owned enterprises,mergers and acquisitions will become more and more popular.However,whether the enterprises value will be added or the performance of the enterprises will be better is still under discussion.There are several factors which can make an influence on the M&A performances.Among all of them,political connection is very essential.This thesis reviews the main research articles all over the world at first,and then introduces the related theories about enterprises,government and M&A.Also,using 272 listed enterprises in China Stock Market who conduct M&A from 2011 to 2013 as an example,this thesis researches the influence political connections and its intensity made on the enterprises M&A performances.The conclusions are as follows.First,there is a strong negative correlation relationship between political connections and enterprise M&A performances.It shows that,on one hand,excessive government intervention will bring about the misallocation of resource.On the other hand,the decision for conducting M&A made by enterprises should be more prudent.Second,the M&A performances of private enterprises are worse than state-owned ones which gives more confidence in the following reforms.Third,the stronger the political connection intensity are,the poorer the M&A performance the enterprises have,both for state-owned ones and for private ones.Enterprises should pay more attention on the researches and developments of its own product instead of the only purpose for the size enlargement.