| Mergers and Acquisitions(M&A)performance is an important issue in theory and practice.There have been many researches aimed at factors influencing performance,including transaction characteristics,enterprise characteristics,intermediary characteristics and environmental characteristics,etc.However,there are no clear and consistent conclusions,and some are even contradictory.There may be unidentified variables that can explain the difference of post-merger performance.The market bubble timing of M&A transaction is very likely to be a new variable that has a significant impact on M&A performance.Therefore,this paper introduces the market bubble timing of M&A transaction into the study of M&A performance,and concentrates on the differences of the long-run market performance between M&A transactions announced in the bubble period and outside the bubble period,and M&A transactions announced in the first half of the bubble period and the second half of the bubble period.Three contributions to the existing literature can be identified from this paper:Firstly,the stock market bubble of China was detected from the perspective of the combination of investment and income,Stock price and dividends were combined to detect and stamp market bubbles.Most of the existing researches on China’s market bubbles are qualitative.Few empirical studies can only test whether there are bubbles and cannot effectively identify the starting point and end point of multiple bubbles.At the same time,the existing literature all detect stock market bubbles in China through the price index,without considering the income factor.Whereas,the high stock price supported by high dividends does not constitute a bubble.Based on the financial present value model,the right-tail recursive ADF test was applied to test and stamp multiple bubbles in China’s multi-level stock market.Unlike the other researches,the ratios of the real stock prices’ natural logarithm to the real dividends’ natural logarithm are used for testing instead of stock price index.Bubble stamping results show that there are 8 bubbles in the Main-Board Market from April 7,2006 to August 28,2020,6 bubbles in the Small and Medium Enterprises Board(SMEs)from December 29,2006 to August 28,2020,and 4 bubbles in the Growth Enterprise Market(GEM)from June 4,2010 to August 28,2020.The detecting and stamping of market bubbles clears the way for studying the influence of market bubble timing on M&A performance.Secondly,the long-run market performance of M&A was calculated by modified Buy and Hold Abnormal Return(BHAR)method.M&A performance generally includes market performance and accounting performance,and market performance can be divided into short-term market performance and long-run market performance.But there may be insufficient disclosure and manipulation in accounting indicators.For investors,the market performance is more significative.Because a longer event period can capture the full impact of M&A with a high probability,this paper concern of the long-run market performance for acquirers.BHAR is a widely recognized method to measure long-run market performance.However,when calculating the long-run market performance of M&A in China,the benchmark return is confirmed by market model,market adjustment model and 5×5 reference portfolio in the most existing literature,which will lead to new listing bias,rebalancing bias,and skewness bias in BHAR calculation.So,the calculated long-run abnormal returns are problematic.Based on this,when using BHAR method,this paper combines the control firm method and the reference portfolio method.Buy-and-hold abnormal returns are calculated using carefully constructed benchmark portfolio,and the significance test of BHAR series is based on a bootstrapped skewness-adjusted tstatistic,so as to alleviate these three biases.For the sample of M&A transactions announced from January 1,2007 to December 31,2017,the post-merge long-run market performance of 1 year(793 observations),2 years(692 observations)and 3 years(629 observations)are calculated separately.The results show that,on average,the market performance of 1,2 and 3 years after M&A are significantly 0.085,0.067 and 0.062 at 1%significance level,respectively.It indicates that from the perspective of revised BHAR model,the M&A transaction of Chinese listed companies in the sample period creates value for the shareholders of the acquirer.The M&A of listed companies have contributed to the growth of wealth after the reform and opening up,and to the unprecedented economic miracle in China.Thirdly,on the basis of the existing factors influencing performance,the timing of market bubble is introduced into the research of M&A performance.The long-run market performance and the market bubble timing of M&A transaction are separately taken as the dependent variable and the main independent variable,and several influencing factors are selected as control variables from the existing literature.Through multiple regression model and difference-in-difference regression model,this paper reveals the impact of market bubble timing on M&A performance.The dummy variable Bub is constructed according to whether the M&A transaction is announced in bubble period or not:Bub is equal to 1 if the M&A transaction is announced in bubble period or 0 otherwise.It was found from regression results that the coefficient of Bub was significantly-0.271 at 1%level.This shows that,on average,the performance of M&A outside the bubble period is statistically significantly better than that in the bubble period.The conclusion indicates that,on average,M&A outside bubble period is relatively rational.However,when the financial market is highly prosperous or the stock market is highly valued,the M&A transaction is relatively irrational,which has a negative impact on the value creation of the shareholders of the acquirer.Furthermore,for all M&A transactions announced in bubble period,the dummy variable HBub is constructed according to whether the M&A transaction is announced in the first half of bubble period or not:HBub is equal to 1 if the M&A transaction is announced in the first half of bubble period or 0 otherwise.It was found that the coefficient of HBub was significantly-0.370 at 5%level.This indicates that,on average,the performance of M&A transaction announced in the second half of bubble period is statistically significantly better than that in the first half of bubble period.The conclusion shows that when the bubble is about to burst,the rationality of M&A decision is improved,which improving the performance.Because the market bubble timing of M&A transaction is one of the significant influencing factors of M&A performance,company managers should take the possible influence of market bubble timing on M&A performance into consideration in addition to the existing influencing factors. |
