Mispricing And M&A Premium

Merger and Acquisition(M&A),as a strategic way to reallocate resources,is a significant means to achieve industrial layout of enterprises.With the rapid development of M&A market,the phenomenon of M&A premium generally appears in China’s M&A market.A high M&A premium will have a great impact on the financial performance of the main merger party and cause huge goodwill impairments in the later stage.This paper explores the internal mechanism of mispricing affecting the M&A premium by selecting the M&A events of Shanghai and Shenzhen A-shares from 2012 to 2018 as samples from the perspective of the capital market.The results show that both the mispricing at the company level and the mispricing at the industry level have a significant positive impact on the M&A premium,and the mispricing at the industry level is the main influencing factor.In addition,the higher the M&A premium is,the more obvious the effect of mispricing on the M&A premium is.In order to further explore how mispricing influence M&A premium,this paper explores the impact of mispricing on the premium payment ability of listed companies from the perspective of financing constraints.It is found that mispricing enables companies to pay M&A premium by loosening their financing constraints.In addition,mispricing also has a positive impact on the growth of external equity financing and total debt financing of listed companies in the year of M&A.This also further proves that mispricing provides sufficient financial support for premium M&A by loosening financing constraints of listed companies and promoting corporate financing.In the heterogeneity test,the results show that the impact of mispricing on M&A premium is more obvious in the companies with lower cash ratios and higher financial development level.