Study On M&As Driven By The Sector-wide Misvaluation

As China's stock market continues to improve,the phenomenon of mergers and acquisitions of listed companies is increasing day by day.However,the reasons for the mergers and acquisitions initiated by M&A companies are rather complex.The research on the motivation of M&A based on the theory of market mispricing has been significantly proved in foreign markets at the same time.The wrong valuation of the price is a big driver.This article is to explore the adaptability of the theory in the Chinese market,combined with China's special national conditions,the relevant institutional environment,political environment and economic environment to analyse,the empirical model verified that the theory of market mispricing has a driving effect on the company's mergers and acquisitions,and further subdivided mispricing of stock market to impact the corporate M&A.From theory,this paper puts forward the corresponding research hypothesis test?We provide evidence that ex-ante misvaluation matters for merger activities in the A-share 2010-2015 using a sample of 264 acquirers and targets.The study decomposes the misvaluation into 2 factors,i.e.firm-specific mispricing at micro level in short term and sector-wide mispricing at meso level in long term,respectively.And the question is that which level of the misvaluation drives the merger activities.It shows that it is the sector-wide error but not the firm-specific error motivating the merger activities.In other words,the firms in the more overpriced sectors are more likely to initiate mergers.Under the background of strengthening structural reform of the supply front,pushing the five priority tasks,and preventing the financial system risks,the study may provide valuable opinions for transforming and upgrading the industries in China.