Research Of Corporate Governance Of Listed Companies In China And Overseas Mergers And Acquisitions Performance

This paper studies the relationship between the overseas mergers and acquisitions performance and level of corporate governance of the listed companies in China. Recent years China’s listed companies have a higher growth trend in terms of the number and value of M&A transactions from overseas. However, the performance of overseas mergers and acquisitions is not satisfactory. According to the existed literature, there are a lot of factors that affect the performance in overseas mergers and acquisitions of listed companies in China. On the basis of the existing research scholars, this paper analysis the relationship at the enterprise level, which was less applied before, the Corporate Governance and overseas M&A performance relationship.First of all, we initially built the performance measurement system of overseas mergers and acquisitions. The comprehensive measure commonly used in the field is divided into short-term performance and long-term performance. The event study methodology is used to measure short-term performance. That is to measure the abnormal fluctuations in its share price caused by the cumulative excess return rate during the window period of10days from the date of the announcement by the listed companies in overseas acquisitions. Descriptive statistics show that the majority of Chinese overseas M&A short-term performance of listed companies is positive. The financial indicators methodology is used to measure long-term performance. That is using the data of Chinese listed companies’ overseas M&A activity in the total return on assets for the year after the merger ROA. The data used is getting from the CSMAR database.Due to our special stock market background, in2006there came the completion of the equity division reform. It is also from that year, the overseas M&A cases have substantial growth. As this paper is going to study the long-term performance of listed companies in overseas mergers and acquisitions at the same time, and will choose the corporate financial statements data for one year after the completion of the overseas M&A, so the sampling interval is from2006to2010. We pick those listed in Shanghai and Shenzhen companies which have occurred overseas mergers and acquisitions as samples, then, after screening after striking out, there retained the202listed companies as samples.As to the corporate governance characteristics, it is mainly divided into three parts:1) The shareholding structure, including the stake ratio of the largest shareholder, the Herfindahl index, the proportion of state-owned shares;2) Board of Directors mechanisms, including the size of the board, chairman of the board and separation of the post of general manager of two independent directors of proportion;3) Executives incentives, including executives monetary compensation and executive equity incentive proportion.In addition, three variables might be interested in the impact of overseas mergers and acquisitions performance is introduced in the model as control variables:1).the scale of overseas M&A transactions;2).the scale of the company’s assets;3).the capital structure. The assumptions of the relationship is based on the existing viewpoints and the combination of China’s actual situation,.During the regression analysis, we first analysis the individual influence of the three variables:the first shareholding structure, the mechanism of the Board of Directors, the executive’s incentives. Then two of them are introduced into the regression model and the same time. At last, three of them together are in the regression model to study the overall role of the performance of overseas mergers and acquisitions.The regression results show:Largest shareholding ratio between short-term performance with overseas mergers and acquisitions is a more significant negative correlation, but is positively correlated with the long-term performance; no significant correlation between the Herfindahl index with overseas M&short-term performance, but have a significant positive correlation with Long-term performance relationship; proportion of state-owned shares has no significant impact on long-term performance, but showing a different direction to the short-term performance when together with different variables; Board size had no significant correlation on both short-term and long-term performance of overseas mergers and acquisitions; the post of general manager and chairman of two separation will bring positive effects on short-term performance of overseas mergers and acquisitions, but do not significantly affect the long-term performance; proportion of independent directors has significant negative correlation between the short-term performance of the M&A, but a significant positive correlation between the long-term performance; Executives monetary remuneration levels of short-term performance of overseas mergers and acquisitions of listed companies is not significantly correlated with long-term performance, but shows a significant positive correlation between short-term and long-term performance; the executives stake has positive correlation relationship with overseas M&are significantly, both short-term and long-term. This paper then analysis the empirical results with the theories.Finally, according to the findings of the empirical analysis, we give some suggestions for the listed companies to better invest overseas. Listed companies should pay attention to optimize the ownership structure. The government should also focus on further deepening the shareholding reform to create a more efficient capital market environment. The enterprises should improve the degree of attention of the key role of the Board of Directors mechanism and build a reasonable mode of the Board of Directors thus to make it better play its due role. As to the executive incentive mechanism, it will be appreciated if a appropriate increase in the proportion of equity incentive, because it helps executives make more favorable overseas M&A business decision-making. The end of the text, the inadequacies of the paper empirical research and model design limitations is pointed out.