Analyst Coverage And M&A Premium

With the development of capital market,mergers and acquisitions have become an important manner for listed companies to gain scale effect,expand market share and improve performance.The reason why M&A can play such a important role is that successful M&A have the functions of using market mechanism to allocate resources efficiently,produce synergy effect and increase social welfare.However,M&A does not necessarily create value for M&A shareholders.M&A premium plays a crucial role in M&A.The purpose of our paper is to study the impact mechanism of analyst coverage on M&A premium.Firstly,the paper reviews the literature on analyst coverage and M&A premium.Secondly,the impact of analyst coverage on M&A premium is analyzed based on the information intermediary,and the role of analyst coverage on M&A premium is further studied from five aspects: the characteristics of M&A transactions,the characteristics of enterprises,the characteristics of analysts' forecasts,the characteristics of analysts' individuals and post-M&A performance.At the same time,it puts forward relevant research hypotheses.Thirdly,the paper chooses the listed companies of A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2004 to 2016 as the research object,and makes descriptive statistics and univariate tests.In addition,the regression model is constructed according to the corresponding research hypothesis.Finally,the sample is analyzed to test the impact mechanism of analyst coverage on M&A premium.The results show that analyst coverage can speed up price discovery,correct the stock price,and lead to lower M&A premium.The mechanism test found it supports the "information mechanism" hypothesis,that is,analyst coverage can speed up price discovery,reduce information asymmetry between the two sides of M&A,and then reduce M&A premium.Firstly,from the characteristics of M&A transactions,the larger proportion of equity acquisition,the stronger significance of the above relationship.Secondly,from the characteristics of enterprises,the higher transparency of enterprise information,the stronger significance of the above relationship.Thirdly,from the characteristics of analysts' forecasts,the larger adjustment of analyst earnings forecast,the stronger significance of the above relationship;the more accurate of analyst earnings forecast,the stronger significance of the above relationship.Fourthly,from the characteristics of analysts' individuals,both ordinary analysts and star analysts canreduce M&A premium,but the role of star analysts is more significant.Finally,analyst coverage can improve the long-term performance of target companies.The paper studies M&A premium from the perspective of analyst coverage,expands the literature of analyst coverage on investment decision,and provides direct evidence for the research of information intermediary role.In addition,the paper will help the management of enterprises to make more scientific investment decisions in M&A,and help the stock traders to make more scientific investment decisions in securities.