Research On Financial Resources Misallocation And Enterprises' Mergers & Acquisitions

Since the financial crisis in 2008,the scale of China's financial sector has grown rapidly to the largest level in the world,but the allocation efficiency of financial resources in our country is still lower than the mature capital market in western countries obviously.Both the financial market segmentation and the ownership discrimination are the main problems that hindered the capital allocation efficiency for further improvement.During the same period,China's M&A market has registered a blowout-type growth,especially the M&A events between domestic companies has become more frequent,which played an important role in promoting the speed of economy growth and the transformation of industrial structure in China.Since the China's economy has entered the "new normal" era,further exploration about the relationship between the domestic financial market and the M&A market,not only have a certain degree of research value,but also have some higher practical significance.In western research theory,the market liquidity has been considered as catalyst in the development of M&A market.However,with the financial market segmentation and ownership discrimination existed in China,whether the financial resources'misallocation have impact company's M&A decision?To solve this problem,this paper has developed a choice probability model about whether a domestic company participate a cross-regional acquisition.This model provides the opportunity for this paper to do empirical regression on provincial level,but also can analyze the results and influential mechanism on firm level.Based on theoretical model,this paper builds a balanced panel data on provincial level for empirical tests with a data sample contained at least 14 thousand domestic M&A events.The results show that:with the influence of financial market segmentation,the maldistribution of financial resources among different provinces has affected the company's M&A decision significantly.The proportion of both acquiring companies and acquired companies which participate in cross-regional acquisitions shows a positive relationship with the level of financial resources accumulated inside the province.By considering the impact of ownership discrimination,this paper divides the data sample into private enterprises sample and local-SOEs sample separately.The empirical results show that,to avoid insufficient financing problem in the future,private enterprises prefer entering provinces with abundant financial resources by the method of cross-regional M&A.While the local-SOEs take more cross-regional M&As with the increase of local financial resources level,to looking for more investment profits.Based on the empirical results,this paper believes that the problem of misallocation of financial resources has influenced the outcomes of the domestic M&A market significantly.Since the financial resources misallocation has impacted the domestic M&A results,whether those acquisitions,which comprised firm's subjective initiative,have relieved the negative impact of misallocation problem?Aiming at the ownership discrimination and financial resources maldistribution,this paper compares some financial indicators of acquiring firms before and after the acquisitions,to check out whether M&A events have optimized the financial resource allocation results in the firm level.In the sample of domestic M&A events initiated by A-share listing companies,this paper has discovered that:after the completion of acquisitions,the debt financing level of Non-SOEs has increased significantly and their financial constrain problem has been relieved.on the contrary,the asset-liability ratio of SOEs has decreased significantly.This result implies that the M&A events help to solve the ownership discrimination problem among those companies.Meanwhile,this paper also discovers that companies uses the method of cross-regional acquisitions to financing in other areas,and those companies won't be restricted by the financial market segmentation any more.Taken together,since the financial resources have been misallocated,the M&A decisions had been impacted significantly in China,which implies the misallocation problem might hindered the efficiency of the domestic M&A market.However,as the environment of domestic M&A market has become more developed,the M&A decisions have composed of the subjective initiative of the acquiring firms and been considered as a positive response for financial resources misallocation problem.As the result,the domestic M&A market can help to relieve the negative impact of financial resources misallocation problem on those companies.