Relationship Among Financial Environment、Agency Problem And The Performances Of Mergers And Acquisitions

Nowadays, China’s mergers and acquisitions market is unusually hot. Statistics show that in the first half of 2013 China’s m&a market involves the transaction value of about 250 billion yuan, increasing by 21.4% over the previous year, up 121% month-on-month, reaching a record high in the history of semiannual transaction value of China’s m&a market. Statistics show that in the first half of 2013, there’are nearly 800 China’s capital market m&a cases, which is more than the annual amount in 2012. Mergers and acquisitions of listed companies in our country step into the new stage of development, meanwhile, along with the completion of the reform of non-tradable shares of listed companies, the scale and the way of the mergers and acquisitions, and other relevant aspects all presented different characteristics when compared with previous stages. Therefore we need to analyze m&a performance problems in a new perspective.This paper argues that in addition to the influence of agency problem on m&a performance, the financial environment emerging during the stage of special transformation in China also have an impact. Furthermore, financial environment and agency problem have interactions, which in turn will affect m&a performance together.The main conclusions drawn from the current study are as follows:The higher the shareholding ratio of largest shareholder of the listed companies is, the better its short-term m&a performance will be. But this effect cannot exist for a long time. That equity concentration has no significant explanatory power to long-term acquisition of listed company merger and acquisition performance. And it shows the trade-off between ownership concentration and financial environment. This conclusion is clearly reflected in companies of poor performance,but is not evidenced to be significant by the empirical results in companies of better performance.The higher the ratio of managers’shareholding of listed companies is, the better the short-term m&a performance will be, but this has very little effect on its long-term m&a performance. And the relationship between managers performance ownership and financial environment is alternative. This conclusion is clearly reflected in companies of poor performance which is not significant in companies of better performance.The more free cash flow is available in listed companies, the better the short-term m&a performance will be, and free cash flow has little effect on its long-term m&a performance. That free cash flow hypothesis has explanatory power to short-term acquisition of listed company merger, but not for significant long-term m&a performance. And the relationship between free cash flow and financial environment is complementary. This conclusion is clearly reflected in companies of poor performance,and the conclusion was not significant in the company with a better performance.