The Impact Of Officials' Promotion Motivation On Corporate Mergers And Acquisition

Since the 21 st century,the number as well as scale of mergers and acquisitions of Chinese enterprises has shown a steady upward trend.However,when scholars study the M&A performance of Chinese enterprises,they generally find the existence of the "M&A performance paradox",that is,M&A cannot bring better performance to the acquiring company.The traditional explanations for this problem include: the Synergy theory,the managerial overconfidence theory and the Agency theory.But in the context of our country,government intervention has very strong explanatory power in this question.Many mergers and acquisitions of Chinese enterprises are subject to government intervention,and this intervention is often carried out in the mode of profitmaking enterprises merging with loss-making enterprises.Therefore,in addition to the goal of making profits,Chinese companies also bear heavy regional political responsibilities,or "policy burdens." With political connections as a bridge and political intervention as a means,local governments can exert influence on business decisions and investment decisions.The promotion tournament mechanism gives local officials the motivation to promote local economic development in order to achieve personal political promotion.Mergers and acquisitions have always been favored by local officials because they can expand the scale of enterprises,create jobs,and solve the negative effects of loss-making enterprises on the regional economy in a short period of time.This paper believes that there is a relationship between the promotion of local officials and corporate mergers and acquisitions.Therefore,31 provincial-level officials of provinces,municipalities and autonomous regions from 1998 to 2020 are selected as the research objects to study the relationship between local officials and mergers and acquisitions initiated by listed companies in that region.This paper chooses officials’ political connection as a measure of promotion motivation,and argues that when officials do not have political connections,their promotion motivation is stronger,while when they have political connections,their promotion motivation is relatively weaker.On this basis,this paper draws the following conclusions on the method of using multiple regression:1.There is a significant negative correlation between the political relations of local officials and the number as well as scale of mergers and acquisitions,indicating that there is a positive correlation between the promotion motivation of local officials and the total number of mergers and acquisitions of listed companies in the locality.The greater the official’s motivation for promotion,the more mergers and acquisitions of local listed companies he promotes.2.The promotion motivation of officials has a significant positive impact on the number and scale of local mergers and acquisitions,and has a significant positive impact on the number of non-local mergers and acquisitions.It shows that local officials have preference for local listed companies to initiate local mergers and acquisitions and foreign mergers,but the preference for local mergers is stronger.3.Under the framework of local mergers and acquisitions and non-local mergers and acquisitions,the promotion motivation of officials has a significant positive impact on the number of local mergers and acquisitions of central enterprises,the number of local mergers and acquisitions of private enterprises,and the number of non-local mergers and acquisitions of private enterprises.The promotion motivation of officials has a stronger positive impact on the number of private enterprises’ non-local mergers and acquisitions than local mergers and acquisitions.It shows that local officials prefer local listed central enterprises to carry out local mergers and acquisitions,and their preference for private enterprises to carry out non-local mergers and acquisitions is stronger than local mergers and acquisitions.4.The promotion motivation of officials under the age of 63 has a more obvious impact on the number of mergers and acquisitions.It shows that the age limit for official promotion will have an impact on the behavior of officials,and local officials are more motivated to promote local enterprises to carry out mergers and acquisitions before the promotion period.5.The promotion motivation of officials whose tenure is less than or equal to 4years has a more obvious impact on the number of mergers and acquisitions,and this impact increases with the increase of tenure.It shows that the tenure system of local officials will have an impact on the behavior of officials.With the increase of tenure,officials have a stronger desire to make political achievements and more radical behaviors.The innovation of this paper is mainly reflected in three aspects.First,it is innovative in topic selection.This paper studies the influence of local officials’ promotion motivation on corporate M&A behavior.There have been many studies on the relationship between the promotion of local officials and the local economy,the promotion of corporate executives and corporate mergers and acquisitions,but the academic research on how the promotion of local officials affects corporate behavior is still insufficient.The research results of this paper enrich the research in this field.Secondly,the variable selection is innovative.This paper selects the political connection of officials as a measure of promotion motivation as the core explanatory variable,while the existing literature mostly chooses age or tenure to measure the promotion motivation of officials.In the robustness part,this paper proves that officials’ political connections and their economic performance(this paper uses the number and scale of mergers and acquisitions as the measure)have a positive effect on their promotion,and the two have a complementary relationship.This proves that the selection of explanatory variables and explained variables in this paper are reasonable.Finally,this paper puts forward two suggestions: 1.Diversified evaluation indicators of officials.On the basis of attaching importance to the economic indicators,strengthen the weight of indicators such as environment,medical care,health care,and education.2.Accelerate the transformation of China’s economic system,reduce the decision-making intervention of local enterprises by government departments,avoid ineffective expansion of the scale of local enterprises or hinder cross-regional cooperation for sake of their own promotion goals.