Financing Constraints,Payment Methods,and Corporate M&A Performance

M&A as a way of re-allocating resources has played a significant role in the transition economy.China's economic development has entered the M&A and restructuring phase with the new investment-driven model.In the financial field,there have been many researches on mergers and acquisitions focused on the three aspects of mergers and acquisitions motives,payment methods and M&A performance,and have neglected the research on financing capacity that has a decisive role in M&A transactions.The financing capacity determines the degree of financing constraints of the company.For this reason,based on the existing literature on financing constraints and payment methods,payment methods and corporate M&A performance,this paper theoretically analyzes the path of financing constraints on corporate M&A performance and the mitigating effect of M&A on corporate financing constraints.This article uses the data of mergers,acquisitions,reorganizations and corporate governance of China's listed companies from 2008 to 2016 to empirically examine the relationship between financing constraints,payment methods,and corporate M&A performance.Theoretical analysis shows that non-cash payment methods reduce the company's cash cost expenditures and introduce strategic investors to improve the supervision mechanism of external components,which will help improve the performance of corporate mergers and acquisitions.For financing-constrained companies,it is more difficult to finance outside the company.In response to other investment activities,companies tend to retain sufficient internal cash within the company.The adoption of non-cash payment methods has reduced the outflow of this part of funds and improved the efficiency of the use of corporate internal funds.As a result,the rate of improvement in the performance of corporate mergers and acquisitions has become more pronounced.Non-cash payment methods include share-based payment and mixed payment.The share-based payment consumes less money,which improves the efficiency of internal fund use and thus promotes the performance of corporate mergers and acquisitions.The empirical results show that,as a whole,non-cash payment methods are significantly positively correlated with corporate M&A performance.That is to say,non-cash payment methods are more conducive to the improvement of corporate M&A performance.After integrating the financing constraints,it was found that the corporate M&A performance is more sensitive to non-cash payment methods for financing-constrained companies.After further embodying the non-cash payment method as a share-based payment method and a hybrid payment method,it is found that the sensitivity of corporate M&A performance to the share-based payment method is higher than that of the hybrid payment method.Extended research section,the Heckman model is used to solve the endogenous problems and further explore the relationship between financing constraints,payment methods and corporate M&A performance in this paper.It is found that the higher the degree of corporate financial restraint,the more inclined it is to choose non-cash payment methods to enhance corporate M&A performance.This effect path has no significant difference between the two types of non-cash payment methods: share-based payment and mixed payment.For financing restricted companies,non-cash payment methods pose a certain degree of threat to corporate control rights.With regard to the incentive of companies to restrict the choice of non-cash payment methods,this article analyzes the "self-correction" mechanism.This paper finds that corporate mergers and acquisitions can ease the degree of financial constraints by building internal capital markets and expanding corporate boundaries.In particular,when companies are faced with more serious financing constraints,compared to companies adopting cash payment methods,companies adopt non-cash payment methods to mitigate the problem of financing constraints before mergers and acquisitions.From a theoretical point of view,this paper innovatively proposes the path relationship between financing constraints,payment methods and corporate M&A performance,and the“self-deviation” mechanism of financing constraints.From a practical point of view,when the company has the problem of financing constraints,the conclusions of this paper have certain reference significance for the management when choosing the appropriate payment method for mergers and acquisitions.