Study On The Relationship Between Mispricing In China's Capital Market And The Choice Of M&A Payment Method In The Perspective Of Information Asymmetry

With the Chinese economy entering a new normality,the economy is facing a transformation.Under the background of the country's vigorous promotion of supply-side reforms,mergers and acquisitions as an important tool for industrial upgrading and elimination of outdated production,capacity will soon usher in an unprecedented opportunity for development.However,because the information disclosure mechanism in China's capital market is still incomplete,resulting in an investment mainly based on individual investors.The market lacks efficiency and the acquisition of value information in stocks is highly asymmetric.Due to this information asymmetry and the existence of pricing errors in the stock market,the role of irrational factors cannot be ignored in the decision-making aspects of mergers and acquisitions and the selection of payment methods.Therefore,this paper innovatively combines market-mispricing theory with information asymmetry theory to break the boundary between traditional economic theory and behavioral finance theory.We review the market mispricing theory and focus on the impact of market mispricing on corporate mergers and acquisitions by adopting the M/B decomposition model proposed by Rhodes-Kropf,Robinson&Viswanathan(2005),which is based on the perspective of information asymmetry.Under the theoretical framework constructed from the perspective of information asymmetry theory and the decomposition of market mispricing factors,it analyzes whether the M&A motives and payment options has supported the market mispricing theory in China's capital market.This paper theoretically analyzes the influence of irrational biases in corporate pricing and corporate growth opportunities on M&A activities,based on this,this paper puts forward research hypotheses from the perspective of information asymmetry.Taking the merger and acquisition events in China's capital market from 2008 to 2015 as research samples,an empirical test of the hypotheses proposed was conducted.As a result,it is found that the vast majority of mergers and acquisitions in China at present will choose cash payment method in the acquisition.And when the market is mispricing,it tends to trigger a merger wave.For the choice of payment methods,the overvaluation of the value of the main M&A company and the long-term growth prospects of the target company are decisive factors in the selection of the M&A payment method.Due to the difference in the mispricing and growth prospects of the market perception of different market participants,even companies with overvalued shares in China still have a strong incentive to pay cash.In the view of information asymmetry,this paper gives a new explanation to the choice of M&A payment method.