Regional Peer Effects In Unrelated M&A Decisions

Traditional financial research focuses on explaining the motivations of decisions on unrelated M&A from the perspective of individual characteristics.However,this paper provides a new analytical perspective from the peer effect theory.Using the sample of M&A activities of China's listed companies from 2011 to 2017,this paper examines the peer effects of the regional peer effect in decisions on unrelated M&A among companies.Based on the binary logit regression model,this paper finds that the decisions on unrelated M&A of listed companies has regional peer effect.Namely,whether companies choose to unrelated M&A will be significantly influenced by regional corporation's decisions on unrelated M&A.In addition,this paper finds that the peer effect follows the logic law of imitation.That is to say,a company is more inclined to imitate regional corporations in the same regional group,suggesting that companies are more likely influenced by companies with better corporate governance and higher performance in the same region.In addition,this paper finds that the mechanism of the peer effect including rivalry-based imitation mechanism and information-based imitation mechanism.The former suggests that the companies in a more competitive industry are more likely influenced by the regional peer effect in decisions on unrelated M&A.The latter suggests that the companies which lack of experience of M&A are more likely influenced by the regional peer effect in decisions on unrelated M&A.Based on different regional classification methods,this paper also tests the regional peer effect in unrelated M&A.Additionally,this paper tests the effect according to the nature of the actual controllers of listed companies.Finally,this paper finds that the research results are consistent with the above conclusions.Besides,this paper tests that the financing capacity and the industry profitability has effects on the peer effect in the decisions on unrelated M&A.This paper extends and amplifies theories of unrelated M&A and peer effects,as well as provides some enlightenments for M&A practices.The innovation of this paper is,firstly,the previous literature studied the diversification of M&A decisions from the perspective of the individual characteristics of the company,this article investigate the type of M&A of the company from the linkage between companies so as to expand the existing theory of M&A.Secondly,most of the existing studies of the same peer effect are concentrated in the field of sociology and pedagogy.Although a small number of recent literatures have examined the peer effect of the company's specific financial decisions,there is still no literature to directly examine the regional peer effect in the diversification of M&A decisions.This paper extends the study of the peer effect to a certain extent range.Thirdly,in recent years,domestic M&A activities are becoming increasingly active,and the marketization characteristics of transactions are becoming increasingly obvious.The early study of M&A in China emphasizes the explanatory meaning of administrative intervention and agency theory to M&A.These studies have very important theoretical value,but there is still a lot of space to expand.Based on the existing research on mergers and acquisitions in China,this paper focuses on the study of M&A activities from the perspective of organizational decision-making behavior and social group interaction,which can provide a new perspective and new evidence for understanding the behavior of M&A in China.