The Motivation And Effect Study Of M&A Under Government’s Guidance

Merges and acquisitions (M&A) is a complex business activity. It is essential to industry combination and the national economy development. The frequent merges and acquisitions in developed countries have made us realized that merge and acquisition has become an important method for corporations to expand and become more competitive in the international markets. However, under the unique economic environment of our nation, government has been frequently involved in merge and acquisition. In such a circumstance, this thesis,"the motivation and effect study of merge and acquisition under government’s management" studies the behavior motivation of government’s intervention of M&A and consequence effect. This study will provide theoretic evidence and empirical supports of what is government’s position in corporation’s M&A.The thesis will be based on Principal-Agent theory, residual ownership theory, market failure theory and public interest theory. Under the study method of "theoretic source-intervention motivation-M&A effect", it will study the influence of government in corporation M&A by using the combination of theory and case analysis. The motivation that government using policy to solicit M&A can be concluded into general motivation and particular motivation. The primary theoretic foundation of general motivation is market failure theory, which means the impact of government on M&A is to make up for the shortage of market. The particular motivation is mainly based on residual ownership theory. The government is the final ownerand controller of national-owned property and thus result in the particular motivation. The governmental motivation resulted from these motivations bring positive effects to M&A, and negative effects as well,In order to study in detail, this thesis will study the M&A of Shandong Steel Enterprise. The M&A will use the case of Jinan Steel merging Laiwu Steel, and made corresponding analysis with the motivation and effect of the M&A under the guidance of government. This case study will further support the result of theoretical analysis, prove government’s general motivation and particular motivation in M&A and positive and negative effects. Finally, according to the study result, the thesis provided political suggestions on changing government function, building up relevant legal system, improving officials’ career evaluation, and optimize industrial structure.This thesis has five chapters in total.The first chapter is introduction. It briefly introduces the study’s background, influences as well as the thesis’s structure and study methods.The second chapter is literature review. It has two sections, reviewing articles about M&A motivation and M&A effect respectively.The third chapter is theory analysis. It defines the primary concepts referred to in the thesis. Then it analyzes M&A motivation and effect based on transaction cost theory, principal-agent theory, residual ownership theory, market failure theory and public interest theory.The forth one is case analysis. Taking the example of Jinan Steel merging Laiwu Steel, it studies the motivation and the influences of the merge. The analysis of the case proved the conclusion of the theoretical analysis made in the third chapter.The fifth chapter is conclusion and recommendations. It comes to a conclusion based on the analysis above and makes political recommendations.The main contribution of this thesis is its systemetic analysis of the "motivation-effect" in M&A, and theoretical and practical foundation for determining government’s location in M&A. As China has a unique capital market, the government plays different roles consequently. Different roles resulted from different motivations and thus have various influences. This thesis aims at provide suggestions for government to effectively and positively manage and adjust m&a and avoid negative effect result from over interference, and meanwhile improve the effectiveness of m&a and even the effectiveness of the industry combination as a whole.Although this thesis is based on a long-time study of the motivations and effectiveness of government leading M&A, there are difficulties in practice and limitations in practical experience and theoretical level and might require further improvements.