The Impact Of Related Risk Change On Expected Stock Returns Before And After Acquisition

In recent years,with the development of China’s capital market and the improvement of relevant laws and regulations,the number of companies involved in mergers and acquisitions and mergers and acquisitions events is increasing every year in the market.The idea of this paper is to study how the kinds of risk(including idiosyncratic risk,systematic risk,cashflow risk and discount rate risk)change after the announcement affect the expected stock return by building the path of risk to expected return.The first part of the study is: researching whether the event of M & A will affect the firm stock return and how it affects the expected return;the second part of content is:by adding the "excess value" due to the merge and the asset growth rate to research how the variables affect the stock expected return in the last chapter according to further testing.the sample includes the non-financial firms listed in China’s Shanghai and Shenzhen,and the time is from 1998 to 2015..In the measurement of the related indicators of risk this paper not only includes the systemic risks — beta but also includes the specific risk and the situation of the company and the relevant measure of corporate cash flow risk,the discount rate(cost of capital)industry risk and risk change calculated through the company’s own exceeding the risk of changes in the industry,the risk spillover is the two main innovations of this paper.While breaking the sample according to time divided into before and after reform and the firm type(state-owned and non state-owned enterprises),We found that changes in different samples and related risk on expected stock returns explanation is not consistent in the empirical analysis.This is because of the different capital market environment and different polices.Conclusion:the specific risk can reflect the innovation and the pursuit of growth options business efforts,the specific changes in the variables before and after the acquisition of the stock expected rate of return has positive effect and its effect is robust;systematic risk changes(including cash flow risk,discount rate risk,excess risk)also affects the stock expected return,and the effect is not the same in different companies and different period.