On Financial Strategies Of Cross-border M&A Transaction Based On Significant Assets Reorganization

According to the report of the 19th session of national congress of the communist party of China,China should pay attention to both import and export,accelerate the cross-border M&A of Chinese enterprises,innovate international capacity cooperation,improve investment and financing networks,and foster new advantages in international competition.According to the IMF,it is more difficult to predict the risks of cross-border M&A caused by nationalism,investment protectionism and rigorous investment review.So far,more than 50%of cross-border M&A initiated by Chinese enterprises have been failed,especially those involving major asset reorganization.This phenomenon has been widely concerned by Chinese scholars and executives.Financial strategy is one of the most important decisions among various strategies of enterprises,which plays a key role in the cross-border M&A of Chinese enterprises.It is an urgent task to formulate financial strategies for the cross-border M&A of Chinese enterprises using the relevant theories of financial management and M&A.The free cash flow hypothesis,the second kind of principal-agent theory and the signaling theory are applied in this study,in order to seek for the financial strategies that Chinese enterprises should adopt in the process of cross-border M&A.A data set containing 224 announced Chinese cross-border M&A transaction over the 2005?2017 period is taken as the research samples in this paper.The logistic regression model is adopted to make an empirical test of financial strategies which influence the cross-border M&A transactions of Chinese enterprises.The result shows that the significant assets reorganization has a significant negative influence on the cross-border M&A of Chinese enterprises.When the cross-border M&A transaction involves the significant assets reorganization,cash payments,one-off payment and the transfer of financial control of the target party can significantly improve the likelihood of cross-border M&A success.In addition,the guarantee of the subject matter reduces the likelihood of cross-border M&A success.Financial advice is given in this paper.Enterprises can adopt financial strategies,cash payment,one-time payment,transfer of financial control,financial due diligence and M&A compensation insurance,to defuse the M&A risks.