| By the liberalization of China in the investment field, the biggest Multinational Corporations(MNCs) acquire domestic corporations become very popular. Furthermore, because the market conditions and industry organization are out of the common in China, the cross-border mergers and acquisitions (CBMA) in China as host country may be different from other in countries.Under the framework of the"new industrial economics", the structure of industrial organization in host country is the initial condition of the behavior of the multinational companies, the host government and the host companies, and is also the result of their behaviors. This paper abstracts many characters into parameters and model, in the"reason-result"way, this research first analyze the market entry mode and the strategic motive of M&As of MNCs, then the financing strategy and choosing MNCs by the domestic corporations, and latest the industrial effects and micro-economic effects.The main content and conclusions are summarized as follows:(1) on the market entry mode of Multinational Corporations:First, builds a game theory model to analyze the optimal entry mode. The result shows that: The determinants of the optimal entry mode of the multinational companies not only conclude the trade cost, greenfield investment cost, and merger cost, but also the market size of the host country. With large market size, greenfield investment is advantaged. With extreme small market size, trade is advantaged. CBMA is not correlative with the market size in one way. Then, based on the facts of China's industrial market, highlights the positive industrial factors for CBMA, which includes the high concentrated market, the regional divided market, the imbalance of the development of domestic and foreign industries, the division of the international market, and the big size and growth rate of host country market.(2) On the strategic motive of the foreign capital M&As: The market structure after the foreign capital M&A is assumed to be endogenous. A three-stage game model is built to analyze the conditions for the expelling motive and for the coexisting motive. We got the conclusion that the positive factors for the expelling motive include: the gap of the cost between domestic and foreign companies is big; the cost of the reorganization is high; the product differences are not obvious; the number of the firms is small in the considered market, especially the low cost firms is few. If the domestic government encourages the domestic mergers without synergy, or the domestic market is divided, there will be more foreign capital M&As. If the pricing power of the domestic trademark is different from the foreign trademark, get the conclusion that the positive market conditions include: more trademarks the mergers have; less trademarks the other companies have; weakly pricing power the domestic companies have; low extent of differences the trademarks have; big content of the domestic market has.(3) On the incentive and the welfare effects of the M&As driven by the foreign capital: domestic big corporations absorb foreign capital, and utilize the financial power to acquire other medium or small corporations, which forms a series of mergers and acquisitions (M&As) in an industry. On this phenomenon, an economic model based on Cournot's model is built to analyze the industry organization and the social effects of the M&A according to the transferring of the ownership and the assets between the corporations. Very weak assumptions are made about the demand and the costs.(4) On the selection of foreign capital M&A under the conditions of bidding: An economic model is built to analyze the decision process and the impact on the domestic welfare of two MNCs bidding to acquire a domestic enterprise, under the condition of perfect information. This paper also analyzes the domestic welfare of one MNC acquiring some share of two domestic enterprises operates the two enterprises as one enterprise and operates them separately or two MNCs acquire the two domestic enterprises separately. Based on the result, this paper provides some suggestions of the selection of the foreign capital for the host government. Using a simple Cournot model, demonstrates the different factors influencing the benefit of the integrated corporations and the social welfare in open economics to different extent. The corporations'benefit is influenced by the open extent of the economies and the extent of competition. The social welfare depends on the integrated advantage of the domestic industry. This analysis can help the authorities to veto some foreign capital M&A applications or use tariff to veto or encourage them.(5) On the dynamic interaction between the entry of the multinational companies and china's structure of industrial organization: Under the framework of the"new industrial economics", using cases of several industries of China, this paper concluded that the concentration rate of market will become higher and similar to the international industries; the market competition will be intenser; the industrial efficiency will be higher, and the domestic consumer will benefit form it, but he development of the domestic companies and the domestic industrial competitiveness depend on the domestic factors.(6) On the stock effect and the financial performance of china's listed firms acquired by foreign firms: Based on the data from China's stock market during 1995-2003, we develop from the classical Abnormal Returns Methodology, and use two event windows, with the shorter one showing the investors'expectation and the longer one showing the performance of the mergers and acquisitions (M&As). We get the conclusion that the investors'expectation is higher than the fact, and the performance of the M&As is not ideal. Further more, we find that the performance of the M&As happened in different years don't differ very much, but they do differ among industries. Among the four financial indexes,"net profit per asset"and"return on equity"accord with the average abnormal returns.
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