Research On Investors’ Cognition And Response To The Characteristics Of The Target Company In M&A Announcement

With the sustainable development of China’s economy,M&A has become an important measure for enterprises to optimize resource allocation and realize strategic transformation.However,with the great development of M&A market,there are also some problems,such as poor quality of target Company’s assets and difficult integration with M&A parties in the later stage.All walks of life have realized the importance of the target company to M&A,and more and more attention has been paid to the relationship between the information of the target company and the cognition and reaction of investors after the announcement of M&A.However,few scholars begin with the characteristics of the target company to analyze this issue.At the same time,there is still much controversy about the correlational study on market reaction of M&A announcements.On the one hand,investors’ irrational decision-making doubts the efficient market hypothesis.It is necessary to analyze investors’ behavior mechanism based on behavioral finance.On the other hand,using the traditional regression method to analyze the impact of individual factors,ignoring the nature of the interrelated factors,cannot well explain the investors’ actual understanding and decision-making process of such complex issues as mergers and acquisitions.Thus,Campbell(2016)and other scholars applied the configuration theory to explore how various factors interact to influence investors’ perception and reaction to M&A.The characteristics of target company in this paper are broad concepts,including the characteristics of the target company itself and the characteristics in the perspective of matching and synergy with acquirers.In this paper,332 major asset restructuring cases of Listed Companies in China from 2014 to 2016 are taken as the research objects,and qualitative comparative analysis method is used to study the impact of the combination of characteristics of the target company on investors’ cognitive and decision-making behavior after the announcement of mergers and acquisitions,thus forming the market performance of mergers and acquisitions.It is found that the characteristics of the target company are the important factors affecting investors’ perception and decision-making.Investors are not completely rational,they will be affected by multi-factor combination and perceive M&A in a configuration way.Secondly,during the sample study period,investors in the capital market generally hold an optimistic attitude towards major asset restructuring events.Through the analysis of the configurations that cause the positive market reaction,we find seven paths of combination of antecedents and conditions,and combines the existing theory to summarize six types of transaction prototypes which are similar to the practice.After adding the transaction and M&A context variables,investors’ cognition is more comprehensive and complex.In this paper,we get 14 more detailed paths,divide these configurations into five types of transaction prototypes,and analyze the potential drivers of M&A under each transaction prototype.We also find that most investors will help them make decisions by interpreting the characteristics of the target company in the announcement of M&A,and combining with the management’s empirical knowledge of the synergy effect of M&A,and they think that the quality of the target company and the potential of future synergy effect are important factors.At the same time,there are some irrational investors in the capital market who do not pay attention to the characteristics of the target company but also can get positive excessive returns.They seldom judge the merger from the essence of merger and acquisition rationally and objectively,but are influenced by other subjective and objective speculative factors.Finally,we analyze the configurations of the negative market reaction,which shows that the characteristics of the target company and investors’ perception are asymmetrical causality,and investors generally do not like the deals of target company with poor profitability of business pioneering intra-province Technology Mergers and acquisitions.The results of this study are expected to provide reference for investors,listed companies and regulators.