Environmental Uncertainty,Executive Power And Performance Of M&A

The M&A is an important way for enterprise to develop and expand.In recent years,there is a rapid growth in the Chinese M&A market.According to the PWC,China's mergers and acquisitions to taled $6710 billion in the year of 2017.Actually,behind the frequent M&A is a less optimistic performance.It is reported that more than half of the global M&A didn't get the desired effect.Why do mergers and acquisitions always cause the loss of stockholders' wealth but still become the "favorite" in the capital market? There are some problems in Chinese company such as the principal-agent problem caused by the separation of ownership from management,as well as the "centralized","boss style" problems,which exists in Chinese enterprise for a long time.These led to the problem of centralization of power among executives.Because of this,we have found a new foothold to study the paradox of frequent M&A and negative performance.In addition,there is turbulence of the global economic situation and the strategic transformation of China's economic structure in recent years.So the uncertainty of the Environment play more and more important role in enterprise's decision-making.Based on all of above,this article mainly studies the impact of environmental uncertainty and executive power on M&A performance.Based on information asymmetry theory,principal-agent theory,management power theory and resource dependence theory,we analyze the relationship between environmental uncertainty,executive power and M&A performance.We found that the problem of principal-agent and the asymmetry of information lead to the conflict of interests between management and enterprise owner,and the shareholders' ability to supervise executives is limited.Therefore,higher executive power will result in a greater possibility of large-scale mergers and acquisitions launched by executives for rent-seeking arises.At the same time,environmental uncertainty will restrict the behavior of executives in decision-making.Based on this,we put forward the research hypothesis of this article.H1: Executive power is negatively correlated with M&A performance.Furthermore,this negative correlation is more obvious in state-owned enterprises.H2a: Environmental uncertainty will enhance the negative impact of executive power on M&A performance.H2b: Environmental uncertainty will weaken the negative impact of executive power on M &A performance.Firstly,we review the literature on environmental uncertainty,executive power and M&A performance systematically.Secondly,we sort out the relevant concepts and basic theories.Then we put forward the corresponding assumptions by the analysis of theory.Finally,we select the M&A events of Shanghai and Shenzhen stock market of A-share in China as the research sample.The sample was conducted from 2011 to 2013.We collect the specific indicators from the CSMAR database.Then,we use the relevant model to test the data.The results show that the executive power has a negative correlation with M&A performance,and the negative correlation is more serious in state-owned enterprises.Environmental uncertainty will enhance the negative impact of executive power on M&A performance.At the same time,this article also verifies the impact of three specific indicators of executive power to M&A performance(duality of CEO and chairman,equity dispersion,tenure).These three specific indicators have different degrees of negative effect on M&A performance.Among them,equity dispersion has the most significant ne gative effect on M&A performance.Finally,based on the empirical results of this article,we put forward some policy suggestions for scientifically allocating executive power and increasing M&A performance.The innovation and contribution has the following aspects.(1)When considering the relationship between executive power a nd M&A performance,we distinguish the differences between different executive power and M&A performance.Based on the existing literature,this article expands the research perspective of executive power,and provides reference for perfecting the restriction mechanism of executive power of listed companies in China.(2)The Innovation in research perspective.Most of the researches on executive power and M&A performance consider factors such as free cash flow,internal control,executive compensation and so on.However,as a major decision-making of enterprises,M&A is not only affected by internal factors,but also by changes in the external environment of enterprises.Therefore,in the study of the influence of executive power on M&A performance,we take into account the external factor of environmental uncertainty.This can explain the “ M&A paradox” better.These things are not considered in previous studies.