Research On Influencing Factors Of M&A Premiums Of China's Listed Companies

The success of an M&A case depends much on the price, which is to a large extend relied on M&A premiums. M&A premiums in China differ much from that of developed capital market in cause and influence, due to their different developing stages. The value creation theory and agent theory can hardly be applied to the cases in China. Theories need to be developed based on the reality of China in order to explain influencing factors of M&A premiums of listed companies in China.Based on liquidity theory, private benefits theory and tunneling and propping theory, this article explores the cause of M&A premiums of listed companies in China and proposes the connection of M&A premiums and large-shareholder intervention. Through regression of 47 M&A cases of listed companies in China from 1998-2009, this paper comes to the following conclusions.First, the M&A premiums are relevant to the size of shares transferred. Second, M&A premiums are relevant to the size of target companies'market value. Third, M&A premiums are comparatively lower in affiliate transactions. Forth, liquidity of shares has little influence on M&A premiums. Fifth, M&A premiums are higher when is paid with stock than cash.It is proved in this paper that M&A premiums of listed companies in China do not reflect the expectation of creation of value, but the private benefits of large shareholders. The intervention of large shareholders has a negative impact on the function and healthy development of M&A market.By examining the influencing factors of M&A premiums of listed companies in China from theoretical and empirical perspective, this paper contributes to the practice and theory of M&A premiums and serves as a guide to stock watchdog as well as listed companies.