The Study Of The Performance Of M&A Transactions Of Jinyu Ltd And Taihang Cement Ltd

M&A is a vital tool for firms’ expansion, which has become increasinglyimportant for the management and strategies of firms. The wave of M&A is populararound the world again, which is also essential for Chinese firms. For example, thecement industry is facing a redundant investment of production capacity although it isan essential industry in China. The evidence from western countries shows that M&Ais a good channel to solve the redundant investment problem. As a result, it’s a keyproblem on using the M&A to pull the development of the cement industry back to anormal track. Based on the M&A transaction between Jinyu Ltd (i.e. buyer) andTaihang Cement Ltd (i.e. target), this research analyses the eviden ces on whetherM&A can enhance firm performance in the cement industry, which is supported byboth theoretical analysis and case study.The paper starts with the concepts of M&A, and proceeds with the maindeterminants for the performance of M&A transactions. Based on a theoreticalanalysis, the paper uses the financial statement analysis and the stock marketresponses to examine the M&A transaction between Jinyu Ltd and Taihang CementLtd. I find that the M&A only has a moderate effect on the capital stru cture of JinyuLtd (i.e. leverage ratio). In contrast, it has a positive effect on the profitability ofJinyu Ltd (i.e. return on asset) due to the vertical integration. In addition, it alsoenhances the operation capacity of the Jinyu Ltd, while the effec t is moderate than theeffect on the profitability. Furthermore, the M&A is associated with a CAR of23.94%within three months after the transaction, which shows that investors valuate theM&A for the future prospect of the firm. The M&A of Jinyu Ltd is b eneficial for thecorporate governance, vertical integration within industries, and the development ofthe financing and investment platform.