Research On The Motivation Of Minority Investments And Acquisitions In Listed Firms

Mergers and acquisitions of listed companies is large investment targeted at equity or asset with different motivations, such as reducing agency costs, corporate strategy development, enhancing valuation. Differentiated merger and acquisition motivation determines kinds of equity ownership or asset. Equity ownership of the company is percentage of ownership acquired in the target and divided into minority investments, minority acquisitions, majority acquisitions and mergers. Good equity ownership depends not only on the purpose but external factors, such as macroeconomic, legal system, that is one of risk control in the takeover process.The merger and acquisition market has grown with prosperity and downturn of secondary capital market since 2007. Especially from 2013 to 2015, the percentage of domestic equity acquisitions which are less than 50% of the target increase from 8% to 24% with annual growth rate from 6% sharply to 88%. Domestic listed companies on equity acquisitions increased from 465 to 1178 at the same time.What drives bidders (targets) to buy (sell) part of ownership? Moreover, the research of the motives of listed companies acquisition revolves around the following aspects. However, they are limited. On the management equity incentive, Paige (2013) found that the smaller the relative size of targets were, the more likely managers of targets are to choose minority acquisitions. Meanwhile, relatively large non-listed public company also tended to such purchases, but he didn't mention the latter motivation. Progress on correlation between both parties, debugging, etc. (2010), Fee, etc (2006) thought related acquisitions improved efficiency based on the motivation of incomplete contracts while kinds of equity ownership are inconsistent. The former was more likely to acquire absolute control for use of information superiority to reduce the degree of stakeholder confrontation. The latter are more likely to choose the right proportion stake acquisition to control. Xiangyi Xu (2011) proposed transferring some control degree maintained within the range of 50%-60% improved performance of the objective company. It didn't industry factors. Hou Yu etc. (2012), Jiang Fuxiu etc. (2008) mentioned reducing friction financial costs is one of minority acquisition. Under the poor investor protection system, the bidder and target companies would prefer to acquire minority stake. But it never studied refinement system.The paper sets Shanghai and Shenzhen listed companies'share purchase events from 2007 to 2015 as samples in terms of the acquisition cost compared with majority acquisition from the angle of listed and non-listed companies acquired to discuss motive of minority acquisitions of bidders. As the domestic equity takeovers in the form of agreement acquisition, the tender offer and indirect acquisition. Before discussing the motives acquisition, the paper will compare the advantages and disadvantages of the agreement acquisition and tender offer for analyzing links between types of acquisitions and equity ownership.Compared with the previous acquisition of motivation research literature, this paper has the following three innovations. Firstly, according to the degree of transferring control, it systematically made division in equity structure of listed companies from the angle of quantity and quality and subdivision into traditional acquisition theory of motivation. Secondly, in view of the target companies mostly being non-listed, this article analyzed motivation of acquiring non-listed targets value from analyst's functional perspective. Finally, the paper researches acquisition performance of equity ownership by the way of event study and explore the motivation to acquire minority stake in the view of macroeconomic, legal system, internal development to enrich the acquisition motivation.In this paper, the primary contribution is summary of reasons for the acquisition of minority stake in the rapid development of the M&A market to provide experience of a listed company extensional development. The bidder and target companies establish effective equity ownership to achieve the purpose of acquisition where different motivations play kinds of roles. Secondly, since the small and medium investors make "positive" expectations in listed companies' takeovers basically and often ignore whether firms to protect the interests of investors and make effective use of capital financing. The paper studies the relationship between motivation for acquisitions and equity ownership to provide a new perspective for small and medium investors.First, based on the concept of domestic and foreign equity acquisition the paper defines it that the bidder acquires shares of the target company to obtain the right to control, or the possibility to obtain controlling.Second, the paper sets equity ownership into several categories as follows: greater than 5% but less than 30% of stock transactions referred to minority investments, greater than 30% but less than the proportion of absolute controlling stake of 50% referred to minority acquisition, more than 50% but less than 100% referred to majority acquisition, the acquisition of 100% called mergers where acquisitions of more than 30% and less than 100% are defined as acquisition of controlling stake.Furthermore, this paper compares the domestic stake takeovers and information disclosure requirement so as to summarize the advantages and disadvantages and acquisition costs. Agreement takeover is a major way of domestic listed company, belonging to one-time deal, short time and simple program, saving the cost of acquisition. But the degree of information asymmetry is high and lack of bidding mechanism so as to encroach on minority's interest easily. Tender offer is a mandatory market takeover which is full of information transparency and equality of shareholders' interest for protecting the interests of minority shareholders. But it contracts applicable buy-out scale and acquisition cost is high.Finally, binding studies and literature reviews and from corporate development, legal system, and other macro-economic points, the study assumes equity ownership and the acquisition of motivation. The paper analyzes short-term performance through event study method, and then makes regression analysis on the samples of premium 879 agreement acquisitions and 37 tender offers.The paper concludes the bidder inclines to minority acquisition because it needs to reduce the information asymmetry and financial market friction costs as well as acquisition targets unlisted companies easily realizable. To gain control over its main benefits is not purpose. Target's motive of equity ownership focused on the development of the internal needs of the company, such as reducing agency costs and improve liquidity.The first chapter is an introduction. The second chapter is the theoretical basis of the literature review, comparative analysis of cost advantages and disadvantages of the acquisition agreement to acquire the tender offer and acquisition of elaborate theories of motivation. The third chapter is qualitative analysis of minority stakes motivation theory, hypothesis and sets the appropriate variables. The fourth chapter screens takeovers constituent stock of the variables descriptive analysis, and short-term performance by the way of event study research under the window to explore the relationship between equity ownership and motivation. The fifth chapter is that from listed and non-listed target companies' perspective, the paper makes the regression analysis for acquisition of variables representing the motives to test the main driving force of the company's acquisition of minority stake. The sixth chapter is robustness tests of integration costs with alternative variables. The seventh chapter is conclusion and outlook.