Market Reactions To Control Contests

Since the reform of the shareholder structure,China's control market has been further developed and perfected.In the secondary market,the transfer of control rights is happening more and more frequently via banner acquisition.The essence of control right transfer is actually the competition of company management through different stakeholders.This competition must be accompanied by the intervention of external capital,changes in ownership structure and game events between shareholders and management.Different responses by stock price may occur to different events,which also show the attitude of minority shareholders to the battle to control.In this paper,a single-case study manner would be used by selecting the case of the dispute over the control power of the Vanke Co.,which has high social concern,to explore the market responses to the war for control.Firstly,this paper had provided the introduction of the basic situation of Vanke,the review of the important events during this competition and the analysis of the reasons that why this competition occurred.Secondly,interventions of three acquirers,Baoneng,Evergrande Real Estate Group and Shenzhen Metro Group had been chosen in this event study to analyze the immediate market reactions.Also,long-term performance analysis to the before and after the events had been used to help identify weather the shareholders had been benefited by these events.Then,a qualitative method had been presented for further analysis.In this paper,we find that the market responses caused by different external capital had different characteristics.When comes to Baoneng's four banner acquisitions of Vanke,the market was negative.However,the market showed optimistic responses to Evergrande Real Estate Group and Shenzhen Metro Group.The reason is that when Baoneng started a banner acquisition of Vanke as a ‘barbarian',the market had doubts about its past acquisition experiences and did not agree that Baoneng could bring vitality for Vanke.Conversely,investors believed that a synergetic effect would be brought whether Vanke could corporate with Evergrande or Shenzhen Metro Group,and minority shareholders took a welcoming attitude to these two local high quality capital.According to the procession of this event,when control transfer had been promoted,BHAR would gradually increase.However,when control transfer had been broken off,BHAR showed a decreasing trend.At the company level,in this event,Vanke had not only improved the ownership structure,but also enhanced the management ability and their spirit of integrity and responsibility,which is definitely good for the company in the long run.