Interest Encroachment And Excessive Financialization In Oma Electric’s High Premium Mergers

Enterprise mergers and acquisitions,as a common way for enterprises to optimize resource allocation,achieve effective capital integration,and promote long-term development,have seen rapid growth in scale in recent years,and high premium mergers and acquisitions events are not uncommon.However,with the frequent "explosions" after numerous high premium M&A events,the hidden issues of interest encroachment and excessive financialization in inter enterprise M&A activities have increasingly attracted widespread attention from the academic community.This article is based on the theory of information asymmetry,principal-agent theory,and market timing theory.Through the case of financing in Oma Electric’s high premium mergers and acquisitions,it conducts a deep analysis of the interest encroachment and excessive financialization in Oma Electric’s high premium mergers and acquisitions,to explore the underlying reasons for financing in Oma Electric’s high premium mergers and acquisitions,and to summarize the causes and paths of major shareholders’ interest encroachment and manipulation of listed companies’ excessive investment in financial assets.In the case of Oma Electric’s high premium merger and acquisition of Zhongrong Jin,the relevant parties became the controlling shareholder of Oma Electric through equity transfer,and then injected a small-scale internet finance company under their name into Oma Electric through the high premium merger and acquisition to obtain resource support from the listed company.Then,they collaborated with a series of clever operation methods such as equity pledge,targeted issuance,and high position reduction to achieve the purpose of profit appropriation,At the same time,control the company’s financial assets with high risk of overinvestment.This paper uses the quantitative analysis method and empirical analysis method to identify the problem of interest appropriation and excessive financialization behind the financing in the high premium M&A of Omar Appliances,and then uses the event study and financial analysis method to study the economic consequences of financing in the high premium M&A of Omar Appliances.Research has found that behind the high premium M&A transactions,major shareholders do indeed engage in profit encroachment and take risks through M&A activities,entering the internet finance industry,excessively investing in financial assets to seek more benefits,and damaging the interests of the company and other investors.The study also found that the merger and acquisition event could have a positive impact on Oma Electric in the short term,but it had a highly destructive negative impact on Oma Electric in the long term.Major shareholders continued to increase their investment in the internet finance industry after completing the merger and acquisition transaction.Later,the China Securities Depository Corporation’s business exploded,and the risk of bad debt reserves and huge goodwill impairment erupted.Oma Electric’s capital chain was broken,making it unable to repay loans from internet finance platforms and banks,Oma Electric has experienced unprecedented huge losses,causing serious damage to the interests of small and medium-sized shareholders,and also falling into a quagmire.The financing case of Oma Electric’s high premium merger and acquisition has typical significance in China’s capital market.This article draws the following inspiration through research: firstly,there are various capital operation methods in China’s capital market that evade regulation and encroach on interests,posing a challenge to the regulatory system;Secondly,accompanied by high premium mergers and acquisitions,high performance commitments,and other behaviors,there is hype about the subject matter and the rise in stock prices,which hides the behavior of interest encroachment behind the huge profits obtained by relevant stakeholders;Thirdly,based on the principal-agent problem,major shareholders may resort to high premium mergers and acquisitions for excessive investment,leading the company to excessive financialization and seeking excess profits,damaging the interests of the company and other investors.