Research On The Influence Of Governmeat Competition On The Prefefence And Performance Of The Cross-regional M&A

Since the reform and opening up, both the government governance system of Chinese style decentralization and the reform process which drives, are the key factors of "chinese miracle" with the feature of high speed and long time. But under the background of transition economy, the promotion mechanism of GDP oriented assessment leads to the drawbacks of local government competition, which have become increasingly prominent. Based on the region’s economic interests, the local government take measures to attract capital, talent and other elements into the local area. On the other hand, the local government implement policy of local protectionism to restrict the outflow of resources. Due to the local protection and market segmentation, the size of enterprises is small, the industrial concentration is low, the industrial homogeneity between the regions is serious, and the core competitiveness and social influence is not strong. Along with China’s economy from the "incremental reform" to the "stock reform", corporate M&A has become a continuing social and economic hot spots. Cross-regional M&A as an important way to promote enterprise development and achieve the region’s industrial structure optimization and upgrading, its huge micro synergy effect and the ability to integrate industry is increasingly being valued. Therefore, this research is of great significance in both theory and practice to analyze the influence of Chinese style decentralization and government competition on the preference and performance of cross-regional M&A and put forward countermeasures.In this thesis, we use various methods of normative research, empirical research and mathematical deduction to do the studies. On the basis of theoretical analysis and literature review, we discuss the institutional background and the double motives based on the macro perspective of Chinese style decentralization and government competition.Then we analyze and empirically test the influence of the government competition on the preference and performance of cross-regional M&A. The empirical results show that the open competition to attract elements promotes the cross-regional M&A, while the implicit local protectionism hinders the cross-regional M&A.The central enterprises’guidance and regional strategic planning of the central government is conducive to the cross-regional M&A. At the same time, the market competition of the local government leads to the differences in competitong level and the diversity of strategies, which help to enhance the performance of cross-regional M&A. While local protectionism has a negative impact on the performance of M&A. Finally, aiming at the outstanding problems existing in the competition of the government and cross-regional M&A, the thesis puts forward the policy recommendations and management implications. The main contents of this dissertation include the following four aspects:Firstly, the thesis analyzes the institutional background and the double motives of cross-regional M&A from the perspective of government competition, and builds the general mechanism model of government competition affecting cross-regional M&A. The Chinese style decentralization reform with typical features of the fiscal decentralization and political centralization, stimulates local government to carry out the tournament competition game centering on GDP. In order to win the competition, local government have adopted a dual strategy to attract the inflow of resources and restrict the outflow of resources. The motivation of cross-regional M&A is the dynamic coupling of micro economic benefit, industry integration and government intervention. The central government is actively promoting cross-regional M&A in the pursuit of the policy objectives of optimizing the industrial structure and enhancing the industrial concentration.But local government, based on the consideration of their own interests and differences in resource endowments, take the different coping strategies.The government of elements attraction actively encourage the cross-regional M&A, while the government of local protection take a boycott attitude. On the basis of the above, the general mechanism model of government competition affecting the cross-regional M&A is built.Secondly, based on the institutional background of the government competition, the dissertation theoretically analyzes and empirically tests the impact of government competition on the cross-regional M&A preference. Research results show that under the institutional environment of Chinese style decentralization and government competition, local government based on comprehensive consideration of economic performance and political promotion, usually choose the dominant strategy to attract the inflow of resources and restrict the outflow of resources. The central government, based on the overall interests of the state and the strategic objectives of the industrial competitiveness, actively promote the cross-regional M&A. First of all, the local government take preferential measures such as tax incentives and financial expenditure to attract foreign capital into the local, which promotes the cross-regional M&A. Then some local governments, based on the consideration of their own interests and benefits of control, hinder the cross-regional M&A by the way of M&A approval and administrative regulation. At the same time, the property right of local state-owned enterprises strengthens the hindering effect of the local protectionism. The central enterprises’ guidance and regional strategic planning of the central government is not only conducive to the cross-regional M&A, but also can weaken the hindering effect of the local protectionism.Thirdly, the dissertation theoretically analyzes and empirically tests the impact of government competition on the cross-regional M&A performance. In view of the central government’s main focus on the development strategy of the overall level of the country and the structural optimization of the industrial level, this part mainly analyzes the influence of local government competition on the micro performance of the cross-regional M&A. Research shows that the institutional environment of China decentralization and government competition, not only affects the preference of the cross-regional M&A, but also has the promotion effect and the hindering effect to the performance of the cross-regional M&A. On the one hand, the local government take the market competition strategy based on the optimization of regional capital allocation and corporate growth by the way of M&A, take the fair treatment to local enterprises and cross-regional M&A enterprises, which provides an important environmental guarantee for the improvement of the performance of the cross-regional M&A. The positive market competition forms the difference distribution of the regional competition level and the competition strategy, which creates opportunities for acquiring firms to carry out institutional arbitrage through cross-regional M&A. The greater the difference of the local govement’ competitive strategy of the two sides is, the better the performance of cross-regional M&A will be. And it is mainly through the mediator role of financial subsidies for the institutional arbitrage rent to enhance the performance of cross-regional M&A. On the other hand, some local governments take differentiated treatment and discriminatory policies to local enterprises and cross-regional M&A enterprises based on the private benefits of control and the main concern for tax incentives, which hinders the performance of cross-regional M&A. The stronger the local protectionism is, the worse the performance of cross-regional M&A will be. And the competition pertinence will further strengthens the negative impact of local protectionism on cross-regional M&A.Fourthly, According to game dilemma and low level equilibrium that the local government competition may lead to and the system obstacles and constraints of cross-regional M&A, the thesis puts forward policy suggestions and management implications from the three aspects of the central government, local government and the aquiring company. The central government should be given full play to build the inter provincial cooperation organization, improve the regional tax incentives system, change the assessment of single economic indicators based on regional GDP and improve the assessment system of local government officials to promote the cross-regional M&A. Local governments should reduce the inappropriate intervention to cross-regional M&A as far as possible on the basis of a clear positioning and role change, set up the new idea of cooperative symbiosis to realize the maximization of the surplus of the government by the combination of the advantages and the strong. The acquiring enterprises should make appropriate cross-regional M&A strategy, choose and use the integration mechanism and the performance mechanism to improve the comprehensive performance on the basis of stimulating the motivation of the stakeholders.The main innovation points of this study are mainly reflected in the following three aspects:First of all, the research perspective is unique to introduce the theory of government competition into the analysis framework of cross-regional M&A. Under the background of China’s transition economy, the institutional background of China’s decentralization and the government competition, naturally become the important situational factors that affect the investment of cross-regional M&A.The previous literature of the government intervention mainly discuss the impact of cross-regional M&A, especially the negative impact on local state owned enterprises. In the past, there is less discussion about the background of government competition behind government intervention, and the positive impact of government intervention is ignored. In this dissertation, we try to explain the practical dilemma of cross-regional M&A with the theory of Chinese style decentralization and government competition, analyze the internal logic and the main path of government competition affecting cross-regional M&A.Secondly, the theoretical framework of government competition affecting the preference of cross-regional M&A has been constructed, which has enriched the research results of the government competition theory and the cross-regional M&A. The previous literature mainly analyzes the impact of government competition on the capital investment, ignoring the capital flow direction and the investment mode heterogeneity. According to the theory of government competition, M&A theory,game theory and other multi-disciplinary theories, the thesis builds the theoretical analysis about the influence of government competition on the preference of cross-regional M&A. The local government’s market competition and local protectionism, has the promotion effect and blocking effect on the cross-regional M&A, and the property right of local state owned enterprises strengthens the hindering effect of local protectionism. As far as the central government is concerned, the regional integration strategy and the demonstration effect of the central enterprises, not only promote the cross-regional M&A, but also can decrease the adverse effects of local protectionism. Therefore, this research enriches and develops the academic findings of cross-regional M&A, Chinese decentralization and government competition.Thirdly, the internal mechanism model of the influence of local government’s market competition on the performance of cross-regional M&A is constructed by using the mathematical method. First of all, the thesis divides the transaction of M&A into upstream parts and downstream parts. On the basis of this, we choose the enterprise income tax burden and the change of Tobin Q ratio as the core variables to build a simple model, and make conclusion by mathematical induction. The local government’s market competition forms the difference distribution of the regional competition level, and creates the opportunity for the enterprise to carry out the institutional arbitrage through the cross-regional M&A. The greater the difference in the level of competition between the two sides, the better the performance of the cross-regional M&A is. The research not only deepens the theoretical achievements, but also has a guiding significance to enhance the performance of the cross-regional M&A.