The Impact Of Overseas M&A Experience On Chinese Enterprises' Overseas M&A Performance

Since China's "Going Out" policy and "The Belt and Road Initiative” have been put forward one after another in the 21 st century,many Chinese enterprises began to go abroad and step into the overseas market in response to the call.Cross-border mergers and acquisitions(M&A)has become one of the main ways to upgrade China's industrial transformation and enhance the international competitiveness of enterprises.However,the information asymmetry and other problems in overseas M&A have put forward a severe test for multinational enterprises,especially for those lacking overseas M&A experience.Therefore,how to successfully carry out overseas M&A and whether enterprises can use the previous experience to obtain the expected performance of M&A have gradually attracted the attention of academia and business circles.These two questions need in-depth study.They have become an important issue that we must face.As the core of the enterprise,the executive undertakes the task of formulating and implementing the M&A strategy.This position is also responsible for making decisions based on the current situation of the enterprise.Based on the research of previous studies,this paper further discusses how the role of executives affects the relationship between the enterprises' experience learning of overseas M&A and the performance of overseas M&A.This paper analyzes their regulatory role from the perspective of executive's competence and equity incentives.Base on a sample of A-Share listed companies listed in Shenzhen and Shanghai Stock Exchanges in the period 2011-2016,this paper studies the effect of executive pay gap on corporate risk-taking.The collection and calculation of inner pay gap data is finished manually,and risk-taking is measured with earnings volatility non-system risk.This paper builds an OLS regression model to empirically test the influence and mechanism of executive inner pay gap on corporate risk-taking,and further investigate the moderating effect of managerial ability and equity incentive.Based on the sample of A-share listed companies in Shanghai and Shenzhen Stock Exchanges from 2010 to 2017,this paper selects 427 observed sample data and tests the impact of overseas M&A experience on Chinese enterprises' overseas M&A performance,then further discusses the regulatory role of equity incentives and executive's competence.This paper manually sorts out and calculates the data of overseas M&A experience.It measures overseas M&A experience from the cumulative number of overseas M&A and previous results of overseas M&A,and measures the performance of overseas M&A from short-term cumulative abnormal return rate(CAR)and long-term buy-and-hold abnormal rate of returns(BHAR).The OLS multiple regression model is used for empirical research to examine the promotion and impact mechanism of overseas M&A experience on M&A performance,and the regulatory role of executive's competence and equity incentives.By proposing research hypotheses and conducting empirical analysis,this paper obtains the following research conclusions.First,overseas M&A experience is significant positively correlated with overseas M&A performance.The proficiency of overseas M&A has a positive effect on overseas M&A performance.With the accumulation of overseas M&A events,the enterprises' overseas M&A experience will increase.They will become more proficient in the knowledge and skills required in overseas M&A process,and will be able to rationally utilize resources,control M&A management procedures,and form the learning curve,which will play an important guiding role for subsequent overseas M&A activities.The previous results of M&A have a positive impact on overseas M&A performance.Compared to the failure in overseas M&A experience,successful experience can improve the performance of subsequent overseas M&A.Further research finds that executive's competence and equity incentives will strengthen the promotion of overseas M&A experience on the long-term performance of overseas M&A.To put it specifically,executive's competence can positively adjust the relationship between overseas M&A experience and overseas M&A performance.The learning effect of enterprises from M&A experience will be better with stronger executive's competence,which can improve the performance of overseas M&A.Equity incentives can positively adjust the relationship between overseas M&A experience and overseas M&A performance by reducing the corporate agency costs and lowering the management's behaviour which will bring damage to corporate value.Thus the enterprise will tend to repeat the previous successful M&A activities and bring better overseas M&A performance.