Research On Mergers And Acquisitions And Its Performance Under Government Control

In order to solve structural problems such as overcapacity,less competitive and so on which led by massive investment.Premier Li keqiang has stressed China's reforms three times during the speech at davos world economic forum annual meeting in 2015,and one of the important ways to realize structural reform is through mergers and acquisitions,which could achieve the survival of the fittest,so as to promote sustained and healthy development of the industry.This means that China will witness a new round of wave of mergers and acquisitions at present and even in the future for a long period.As the main body of M&A,state-owned enterprises will take the responsibility of strategic structural reform.Therefore,it is of great significance to further discuss the effects of government in state-owned enterprises M&A.For the government's influence on the enterprise,two theories has been delivered by some scholars,namely "the hand of support" and "grabbing hand"."The hand of support" assumes that government can bring to the enterprise some benefits such as tax incentives,financing convenience,which could solve the problems caused by market failure,while ?the grabbing hand" assumes that government uses its power of control to realize its social and economic goals through enterprises.Although these two theories conflict,scholars tend to research the "grabbing hand" of the government,in fact "the hand of support" and "grabbing hand" of governments coexist.This paper follows the research idea: "government control(source)-enterprise executives(route)–M&A Performance(result)".Combining government control,mergers and acquisitions,enterprise executives and M&A Performance,the influence of government control on enterprise M&A are explored.In this thesis,1122 state-owned listed companies are selected between 2008 and 2011.The impacts of government control and its hierarchy on the size and frequency of enterprise mergers and acquisitions are analyzed,and then the influences of government control and its hierarchy on the performance of mergers and acquisitions are further explored.Because executives of state-owned enterprise are appointed by government,therefore,the executive is introduced into the model to discuss the relationship among the executive,government control and M&A performance.The results show that the government can significantly influence enterprise activity of merger and acquisition.There is a nonlinear "U" relation between Government control and the frequency of merger and acquisition,and it is more significant for enterprises controlled by local government.The greater the government control is,the larger the scale of enterprise merger and acquisition become,however,this relation is more apparent in the central government controlled enterprises.It is also found that government control and M&A performance present a nonlinear inverted "U" relation,and the relationship is more significant in the local government controlled enterprises.Executive powers do not help to improve M&A performance because executives do not focus their ability on enhancing M&A performance;instead,they pay more attention to how to increase their compensation and get benefits from power of control.Finally,it is suggested that the proportion of government control should be reduced appropriately in our country,which is good for M&A performance;promoting the diversification of equity reform of state-owned enterprises,introducing diversified sources of investment and establishing government and social capital cooperation mechanism are necessary;At the same time pay close attention to the executive powers and opportunism motivation in the process of enterprise management,perfect enterprise internal and external supervision and incentive mechanism,guiding executives to put energy into the enterprise management after the mergers.