Operating Cash Flow Manipulation?Institutional Investors And M&A Performance

In recent years,the enthusiasm of listed companies in China for mergers and acquisitions continues to rise,and the amount of M&A has exceeded several trillion yuan for many years.With the growth of scale,although the payment method of M&A is also constantly innovating,nearly 70% of the acquirers still choose cash payment,which means the research on cash M&A has practical significance.M&A are often faced with the financing of funds,and the M&A with cash as the payment method will have more stringent requirements on the cash flow of enterprises.In this paper,we use the normative and empirical research methods to analyze the OLS regression of 786 listed companies in Shanghai and Shenzhen,The conclusions are as follows:(1)According to the prospect theory,the transaction cost theory and the theory of signal transmission,when the acquirer needs to raise funds,in order to speed up the acquisition speed and reduce the use cost,it will transmit its own good information to the market before the M&A,including "packaging" operating cash flow by artificially changing the sales,production and expense behavior.(2)Based on the theory of information asymmetry and the theory of signal transmission,the deeper the manipulation degree of cash flow,the more positive information will mislead investors' capital flow and promote the improvement of the short-term market performance.However,the deeper the manipulation is,the greater the distortion degree of normal business activities of the enterprise will be,and the impaired growth will negatively affect the long-term M&A performance.(3)From the perspective of principal-agent theory and stakeholder theory,the existence of institutional investors can alleviate the adverse effect of manipulation on long-term performance,and the regulating effect of stable institutional investors is more significant.This paper has the following innovations.First of all,previous scholars mostly focused on earnings management in M&A,but they did not pay enough attention to operational cash flow manipulation.This paper studied the cash flow manipulation in M&A from the perspective of enterprises' capital demand and from the perspective of actual activities such as sales,production and discretionary expenses.Secondly,most of the previous literature is theoretical elaboration,with few empirical tests.This paper examines the different effects of cash flow manipulation on long-term and short-term M&A performance through the model.In particular,this paper constructs a set of longterm performance based on operating cash flow.Finally,instead of observing the pair-topair-relation between institutional investors,operational activity manipulation and M&A performance,this paper introduces institutional investors as the moderating variable between cash flow manipulation and M&A performance,which is innovative in the research on the relationship.The research of this paper has double significance of theory and practice.At the theoretical level,this paper enriches the research on the cash flow manipulation in M&A and the research on the M&A performance based on the operational cash flow indicator system.In addition,this paper analyzes the regulatory role of institutional investors from the two aspects of "shareholding ratio" and "institutional type",and expands the research scope of institutional investors.At the practical level,the conclusion of this paper puts forward a solution to the problem of cash flow manipulation in M&A,that is to say,in the case of listed companies,it can reasonably change the operation mechanism of internal governance and create a good environment for institutional investors to play the role of shareholders;in the case of regulators,it is necessary to comprehensively measure and carefully set the assessment criteria related to cash flow;in the case of investment,it is necessary to reasonably evaluate the authenticity and sustainable development of the cash flow level of the intending enterprises.