Financial Constraints,the Method Of Payment And The M&A Performance

M&A, as an eternal topic in capital market, is an effective way to expend and strengthen a company. With the economic transformation in recent years, M&A has increasingly shown its unique significance in the development of economy. Since payment option, as an important link in the process of M&A, is closely related to M&A performance, it is significant to study the relationship between payment option and performance of M&A, which can further guide a company to choose the most conducive payment option for development after M&A according to its own characteristic.This paper focuses on the influence on the performance of M&A of different payment options based on empirical cases of A-share listed companies, and further examines the relationship among financing constraints, payment option of M&A and performance of M&A. Using Event Study Method, Factor Analysis and Regression analysis, this paper empirically tested some hypothesis, based on the samples of M&A cases of listed companies of China in2011. The empirical results indicate that the M&A events do affect the market performance of companies. In the short term, there will be a significant wealth appreciation effect. And in the long term, the company will first suffer from a performance decline and then a performance improvement. In addition, in the short term, the performance of an M&A case with stock payment is significantly superior to that with cash payment. In the long term, there is no significant M&A performance difference between different payments.The main innovative of this paper is introducing financing constraint into the study of relationship between M&A payment option and M&A performance. This paper is a comprehensive study of the interaction between financing constraints, M&A payment option and M&A performance. Through theoretical analysis and empirical research, the results show that compared with companies with no financing constraints, companies with financing constraints are more likely to adopt stock as the payment of M&A. Compared with the company with financing constraints, companies with no financing constraints will have better performance choosing stock as the payment of M&A. Pecking order theory and the theory of signal cannot well explain the phenomena above, in the contrary, the prevention of cash flow hypothesis and the difference between Chinese capital market and western capital market theory can explain the phenomena.