An Empirical Study Of Mergers And Acquisitions Performance Of A-share Listed Companies In China

Well-known American scholar, Nobel laureate George.Joseph.Stigler, once said,"almost no large U.S. Companies grow up only by internal expansion, all of which grow up,by a certain degree, by some form of mergers and acquisitions ". In the context of mergers and acquisitions sweeping the globe, the wave of mergers and acquisitions of Chinese enterprises is also a wave after wave. In academia and industry, whether mergers and acquisitions can improve business performance does not reach agreement. And in our country, the institutional issues in the securities markets and agency problems in listed companies are very serious, and whether M&A activity in China can create performance is doubtful, therefore,study of performance of M&A activity of listed companies in China has very important significance.The paper first introduces the definition, types of mergers and acquisitions, then summarizes the main drivers of M&A, after that, discusses the empirical research of M&A performance at home and abroad which uses the event study methodology and financial indicators method. Through study of M&A performance of Chinese listed companies, confirm that the impact of mergers and acquisitions on listed companies is negative in China, and dig up a range of issues in M&A market in China, and give some practical policy recommendations to address these issues.Event study methodology is used in this paper, and data of M&A of Shanghai and Shenzhen A-share listed companies in2009-2011in CSMAR database is selected, and a series of screening criteria is set, and the final sample is304acquiring companies and210target companies. In this paper, the samples of acquiring companies and210target companies are classified into several categories according to different payment,stock market, types and industries. As scholars have confirmed that China’s capital market has reached weak effective, this paper uses cumulative abnormal return to study M&A performance of both sides. Then in this paper the acquirer and the target performance is analyzed under different classification. The following conclusions are reached:1、No matter to the acquirer or the target or the both party,M&A announcement causes the investors’wealth increase significantly a few days before the announcement, and in a few days after the announcement, the stock price falls, and throughout the whole event interval,the investors wealth are subject to a negative impact, and the cumulative abnormal returns is significantly negative. The results of the study indicates that in China, information disclosure and insider trading is serious, and to both the acquirer or the target, mergers and acquisitions has a negative impact on them.2、Under the cash payment, M&A announcement causes a significant positive average abnormal returns to the investors of acquirer days before the announcement, and days after, there is a significant negative average abnormal returns. In the range of the entire event interval, CAR of is significantly negative. Under the other means of payment, a significantly positive average abnormal return is caused two days before the announcement, and at the entire event window, the investors do not get significantly CAR.Which indicates that M&A announcement has no significant impact on the investors’ wealth. However, due to the sample size being too small, the results may not be representative.To the target under the cash payment, only one day before M&A announcement the investors has significant AAR, and in the intire event window, the CAR of the target companies is negative. Under other mode of payment, the target companies do not obtain significant cumulative abnormal returns. And the same, because the sample size is too small, such an outcome may not be representative.It can be clearly seen, under the cash payment,both the acquirer and the target are impacted negatively significantly, under other methods of payment, the investors’ wealth does not change significantly.3、Acquirer in both Shenzhen Stock Exchange and Shanghai Stock Exchange has a insignificantly positive early reaction, and after the announcement, significantly negative CAR values indicate the market is not optimistic about M&A. in the entire event window, the shareholders’ wealth shrinks. The target company in Shenzhen Stock Exchange has a significantly positive reaction to the announcement of M&A, and after the announcement, the stock price has a downward trend. In the Shanghai Stock Exchange, the target company in the entire event interval has a significantly negative cumulative abnormal rate of return. Visibly, to both the acquirer and the target company, the market has a positive early response to M&A announcement, but throughout the whole event interval, the cumulative abnormal return of the investors is significantly negative.4、To the acquirer under the asset acquisitions, the market responses early before of the M&A announcement, and M&A events has a significantly positive impact on the acquirer. But at the short window after the announcement, cumulative abnormal rate of return is significantly negative. Acquirer under the other acquisition types does not get a significant CAR. Because the sample size is very small, the results may not be representative.To the target party under the asset stripping, the mergers and acquisitions announcement has a negative impact to it, and before the announcement, this negative impact is already beginning to show, indicating that there may be information leakage and insider trading. And to the target under other M&A type, the investors has a significant posit CAR before the announcement. At other event window, the CAR is not significant.5、The study of M&A performance under the Industry classification finds that industry factors have not obvious impact to performance. Finally, according to the problems in Chinese M&A market based on the empirical results, the author gives some suggestions, including:1、From the government perspective:standard information disclosure of Listed Companies’ M&A announcements2、From the enterprises perspective:Optimize the design of M&A programs; Clear the goal of mergers and acquisitions.3、From the investors perspective:Follow a value investment philosophy when investing.The innovation of this paper is:This paper studies both the acquirer and the target company’s performance, and studies the acquirer and the target’s M&A performance in different classification to find the factors that may influence the M&A performance; this paper studies different widows to comprehensively study the performance of the short window before and after the M&A announced; in addition, this paper comes to the conclusion that the performance of the target is significantly negative, and at the end, the author analysis the possible reason.The inadequacies of this paper is:this paper only analyze the short-term performance after the M&A announcement, but does not analyze the company’s long-term performance; This paper selects M&A data in2009-2011when is after the financial crisis, and during this period the economy is in downturn, which might have some impact on the result; In addition, although in this paper, the samples are classified into many different types according to different ways, the sample size is too small in some classification, so the conclusion may not be representative.