Empirical Research Of M&A Market Performance Affected By Mispricing,Arbitrage Risk And Institutional Ownership

In the Chinese new normal phase,the reform of economic supply-side has triggered a new round of mergers and acquisitions(M&A)boom.In the context that M&A is becoming the method of national macroeconomic policy,the debate about the gain and loss of M&A in Chinese capital market has never stopped.Although many studies have already found that the majority of M&A of Chinese listed companies have done harm to the long-term returns of shareholders,but the study on the influence factor of M&A market performance failed to jump out of the modern financial research paradigm which based on efficient capital market hypothesis.Based on the emerging behavioral finance theory,this dissertation does research on the influence of the mispricing on the M&A market performance,the moderating effect of arbitrage risk,and the mediating effect of institutional ownership.This dissertation combs and evaluates the previous literature on M&A,M&A market performance,mispricing,arbitrage risk,institutional ownership and the relationship among them.Then it analyzes the asymmetric information theory,the limited arbitrage theory,and the investor sentiment theory.Meanwhile this dissertation puts forward the research hypothesis about the influence of mispricing on the M&A market performance,the moderating effect of arbitrage risk on the relationship between mispricing and M&A market performance,as well as the mediating effect of institutional ownership on mispricing,arbitrage risk and M&A market performance.In order to test the hypothesis,this dissertation selects M&A event of the Shanghai and Shenzhen A-share listed company between the first quarter of 2004 to the fourth quarter of 2013 as the research sample.It measures the M&A market performance by the use of the long-term event study of cross grouping.It measures the mispricing by the use of market-to-book ratio adjusted by the industry.It measures the arbitrage risk by the use of stock idiosyncratic volatility estimated by the market model.It measures the institutional ownership by the use of changes in the proportion of institutional investors' shareholding.This dissertation finds that,the majority of M&A in Chinese capital market have done harm to the long-term earnings of the acquiring companies' shareholders.This dissertation has drawn the conclusions after the empirical analysis based on the hypothesis.Firstly,Mispricing has a negative impact on M&A market performance,and the adverse effect will gradually strengthen over time.Secondly,arbitrage risk has a moderating effect of interference on the relationship between mispricing and M&A market performance.The arbitrage risk reduces the effectiveness of the capital market.However,in the medium and long term,the direction of the moderating effect has a tendency to reverse,and it might become a moderating effect of enhanced finally.As a result,the arbitrage risk increases the volatility of the capital market and the market risk of M&A companies.Thirdly,institutional ownership has a mediating effect on the relationship between mispricing and M&A market performance,but it does not have a significant influence on the relationship between arbitrage risk and M&A market performance.The institutional ownership can be used for predicting the short-term M&A market performance,but it cannot be used for long-term market performance forecast.Institutional investors are not strictly rational arbitrageur,their improvement effect on the efficiency of the capital market is limited.On the basis of the research conclusion,this dissertation puts forward some policy suggestions to improve the decision making in the process of M&A for the management of the acquiring companies,institutional investors,small investors and the market supervision department.It also analyzes the limitations and prospects of its research,then offers some suggestions for future exploration.