Research On The Performance Of Foreign Capital's Merger And Acquisition Of Chinese Manufacturing Listed Company

Foreign capital's merger and acquisition (M&A for short) is cross-border M&A viewed from the standpoint of Chinese corporations that foreign capital merges and acquires Chinese corporation. What is really the performance of foreign capital's M&A at the background of its practice flourishing currently? Whether it increases or decreases the value of Chinese corporations? It is an issue of common concern in academia, political and business circles.Some domestic studies show that the increase of shareholders' wealth of target firms is not significant after foreign capital's M&A, but other studies show that target firms' shareholders obtain significant wealth increase in longer time and target firms' operating performance improves.On the basis of referring to previous studies, this paper applies M&A theory to make empirical analysis on the performance of foreign capital's M&A. The paper selects those manufacturing listed companies whose M&A by foreign capitals completed in 2002-2004 as research samples. First, it applies the event study methodology to analyze the effect of foreign capital's M&A on shareholders' wealth of sample firms by computing the cumulative average abnormal return gained by sample stocks around the announcement date. Then it applies the accounting study methodology to analyze the effect of foreign capital's M&A on sample firms' operating performance by comparing the change of sample firms' operating performance in the year before and after the completion of M&A.The results indicate that foreign capital's M&A has significant positive short-term wealth effect on sample firms' shareholders in shorter time, but its effect on shareholders' wealth of sample firms is not obvious in longer time. Sample firms' operating performance experiences larger change after the completion of M&A that it improves at first but declines afterward. Foreign capital's M&A has effect on sample firms' operating performance, but the effect is unsustainable. In general, sample firms don't gain in foreign capital's M&A but they don't lose either.