An Empirical Study On The Choice Of Payment Method And Performance In M&A

China is in a new period of economic restructure.Merger and acquisition(M&A)is an important approach to promote industrial transformation and to increase core competency of enterprises.It has always been the hotspot of academic research,both at home and abroad.Making M&A payment choice is the essential link in the whole M&A process,and can have a significant impact on the performance of M&A.Since the split share reform of China in 2005,stock payment and mixed payment is becoming increasingly prevalent.The M&A payment choice of Chinese listed companies is changing gradually from single cash payment to multiple payment methods.This paper uses M&A events of Chinese listed companies from 2009 to 2013 as study objects,and analyzes the motivation of choosing different M&A payment choices and corresponding financial subsequence.This paper presents several characteristic findings of M&A payment decisions:(1)lever deviation,information asymmetry and ownership structure are the primary factors when Chinese listed companies make payment choices.The more an enterprise's leverage forward deviation from target leverage before M&A,the more it is prone to stock payment and mixed payment.When buyers information opacity is high,target companies are more prone to cash payment.When the largest controlling shareholder's control power is threatened,they prefer to use cash payment to avoid their control power being further diluted.(2)The performance of M&As using cash payment is obviously worse than the performance of M&As using stock payment and mixed payment,and this finding is proved by both short-term market performance and long-term operating performance.(3)Leverage deviation,information asymmetry and ownership structure have regulating effect on the financial subsequence of payment methods.Using cash payment when acquiring firm is overleveraged and the information opacity is high will exacerbate the negative impact of cash payment to long-term operating performance.However,higher ownership concentration and higher management shareholding can mitigate the negative impact of cash payment to long-term operating performance.This paper used an innovative approach to construct the frame of how Chinese list companies make M&A payment choices.It studied the mechanism of how payment methods can impact M&A performance.It is a useful supplement to current research of M&A payment choices.