M&A Announcement Effects' Empirical Research

Merger and Acquisition (M&A) is one of the key methods to increase firm size and to expand, is also one form of long-term corporate capital spending, and at the same time, the research of M&A effect is becoming one of the current hotspot theories. Research on M&A was mainly focused on the performance of mergers and acquisitions,impact factors and post-merger integration and so on, but this paper will begin from the point of view on M&A announcements effect. The main objective is to check whether the M&A announcements' open will bring changes of capital market, and whether will make positive excess returns, by calculating a period of time before and after the date of M&A announcement.Throughout history, Western countries' M&A can be traced back to one hundred years ago, the merger and acquisition has experienced five times, means became more and more variety, areas became more and more widely,steps became more and more fast. In a word, whether in theory or in practice, M&A was quite mature. In comparison, the domestic M&A started quite late, only 20 years, but also developed fairly rapid. In Foreign countries, related theories were mainly based on the hypothesis of that capital market was effective, trade was free and corporate profit maximization was agreed that shareholders income maximization, these assumptions in western mature capital markets was close to reality, but in China with the basic of economic transition, under the background of the capital market and the level of insider trading, listed companies'behavior was not the completely market behavior. The existed researches were mainly drew on the experiences abroad, combined with China's national conditions, to rely on the stock price of the company from long-term performance. But the consequence was not intuitive and clear, as there was long time, many factors and complex analysis.This paper is focused on the impact of M&A announcement information to stock price directly and tries to study the short-term price effect to review the direct reaction of capital market on M&A deals. Therefore, This paper select all A-share listed company merger-related incident data for a relatively long period of time, after processing and screening we calculate the excess returns for each year between 2004-2007 because of M&A,taking the method of event study. We found that the capital market can react quickly,and even make respond in advance, but we also found the two years between 2004 and 2005 it produced a positive cumulative excess returns, while the two years between 2006 and 2007 it produced a negative excess rate of return. This shows that the announcement of a capital expenditure does not necessarily produce a positive excess returns, does not necessarily make investors benefit. This also shows that the merger announcement may also be affected by other factors, such as the economic environment or changes in the market and so on.