New Evidence Of The Relationship Between Government And Business Ties And M&A Performance

Merger and acquisition is one of the most notable subjects in financial fields,while building the political connection is an important way to gain excellent M&A performance.However,neither of the previous studies considered the corporates' lifecycle,which will produce two deviations,one is the research results will change significantly as the corporations in different lifecycle,the other is political connection effect will confused to lifecycle effect,while corporations in different lifecycle gain different ability to construct political connection.With the M&A events in 2008-2014,We examine the relationship between corporation lifecycle and M&A performance.Base on this we have a further discussion,which stage would the political connection make a difference on the M&A performance.Firstly,we document that lifecycle would exert great importance on the short-term(one year)financial performance instead of the long-term one and the market performance,among which the growth stage appears to be in the worst financial performance.Secondly,we observe that political connection would make a significant improvement on the M&A financial performance for those companies at the growing stage whereas none at the other.Thirdly,performance improvement for those growing business are mainly embodied in the non-affiliated M&A and horizontal M&A.Overall,our study provides direct evidence that lifecycle have a crucial effect on the M&A performance,and furthermore,M&A performance for companies with political connection.Therefore,the companies should clarify its own lifecycle stage and find out the characters in the present stage,especially when they are in the initial growth stage,maximizing the political resources provided by government to achieve their own expansion will be wise.However,government should advance allocation performance according to the present lifecycle stage of different corporations.What but is worth reminding,corporations in growing stage gain the worst M&A performance and the worst ability to build political connection,it's exactly when the government could do the most.