Political Connections, M & A And Enterprise Performance

Under the background of the national economic transformation, many enterprises in our country are faced with the problem of small business scale and low profitability, and M & A has become the main means to change this phenomenon. In the face of the continued hot phenomenon of M & A market under the special institutional background of our country, it is significant to study the relationship among the political connections, the behavior of M & A and the performance of M & A.Using the M & A data of Chinese A-share listed companies between 2007 and 2014 as the research sample, combined with enterprise nature of equity, this paper studies the influence of enterprise political connections on the behavior of M & A from the perspective of political connections. From four dimensions of the frequency and scale of M & A, the method of payment, the choice of target company and the performance of M & A, this paper specifically discussed the following problems: First, whether political connections would affect the frequency and scale of M & A and whether the influence level would show significant differences in different enterprise nature of equity. Second, what impact of political connections on the choice of target company(profitability) and whether the influence level would show significant differences in different enterprise nature of equity. This paper also studied the influence of enterprise nature of equity on the choice of target company. Third, the influence of political connections on the method of payment. Fourth, the relationship and mutual influence among the political connections, nature of equity, the method of payment and the performance of M & A. Through theoretical analysis and empirical test, it is found that:First, compared to no political connections enterprise, those enterprises with political connections are more likely to occur M & A and the frequency and scale are greater; in the different enterprise nature of equity, the above phenomenon is different: In private enterprises, compared to no political connections private enterprises, private enterprises with political connections are more likely to occur M & A and the frequency and scale are greater, and this relationship is not significant in the state-owned enterprises.Second, compared to political connections enterprise, those enterprises with no political connections are more likely to acquire companies with good profitability, compared with state-owned enterprises, private enterprises are more likely to choose profitable enterprises. In private enterprises, compared to private enterprises with political connections, private enterprises with no political connections are more likely to acquire companies with good profitability, and this relationship is not significant in the state-owned enterprises. The above indirectly proved that private enterprises are more sensitive to the political connections.Third, compared to political connections enterprise, those enterprises with no political connections are prefer to adopt stock payment.Fourth, the performance of political connections enterprise is more significant after the M & A, this effect is obvious in the state-owned enterprises and not significant in the private enterprises; the choice of the method of payment also has an impact on the performance of M & A, when enterprise uses the stock payment, its performance of M & A is better compared to the use of cash payment. Compared to no political connections enterprise, those enterprises with political connections’ performance of M & A are better when they use stock payment instead of cash payment.These finds not only enrich the study of characteristics of enterprise M & A and the performance of M & A, but also may have some implications for the government how to play a positive role in M & A activity.