Investment Bank Relationship,Investment Bank Reputation And M&A Performance

The current industrial structure faces transformation and upgrading,mergers and acquisitions occurs on a large scale.The report of the 19 th National Congress of the Communist Party of China pointed out that we must continue to reduce production capacity,inventory,deleveraging,reduce costs,make up for shortcomings,and optimize the allocation of existing resources.On one hand,the government continues to loosen policy measures,on the other hand,it actively guides intermediaries such as investment banks to participate in mergers and acquisitions to improve market efficiency.In recent years,the Measures for the Supervision and Management of State-owned Equity of Listed Companies(2018)and the Measures for the Management of Major Assets Reorganization of Listed Companies(2019)have been issued successively.These measures have ruled the participation of investment banks in the changes in the state-owned equity and major asset reorganizations.However,contrary to the beautiful vision of the system level,there have been many cases of corruption in investment banks in reality.How to improve the existing institutional arrangements for investment banks in mergers and acquisitions and improve the performance of mergers and acquisitions are important issues to be considered in the theoretical and practical sessions.Based on the game theory,this paper studies the influence of investment bank relations and reputation on M&A performance,enriches the research on the factors affecting M&A performance,and puts forward policy recommendations based on the analysis,it has direct guiding significance to practice.This article takes the listed companies of the acquirers of the Shanghai Stock Exchange and Shenzhen Stock Exchange as a research object between 2013 and 2016.Based on game theory,it constructs four models for multiple regression.Empirical results show that,First,due to the existence of incomplete contracts,investment banks have not reached a state of game equilibrium after many games with enterprises,and the investment bank relationships established by the games have damaged long-term and short-term M&A performance.Second,in the course of many games,the reputation of investment banks has gradually built up.Reputation has a signal effect and an insurance effect.The reputation of investment banks has improved the long-term M&A performance performance.Third,the reputation of investment banks weakens the effect of investment bank relationships on M&A performance.Among investment banks with lower reputation,the negative impact ofinvestment bank relationships on M&A performance is more significant.Fourth,under the imbalanced state of the game,inefficient mergers and acquisitions are prone to occur.Inefficient mergers and acquisitions cause information asymmetry between external investors and the acquiring enterprises.This is the main reason why investment bank relationships can not bring good M&A performance,while investment bank reputation helps to alleviate this information asymmetry.According to the results of this study,the recommendations are as follows: First,the government should strengthen the supervision and guidance of investment banks' participation in company mergers and acquisitions,clarify the responsibilities and legal responsibilities of investment banks to improve the participation and loyalty of investment banks.At the same time,government also need to standardize and improve the business process of mergers and acquisitions,such as borrowing from the practices of Western countries,shifting the commission payment process back and adopting the payment of a fixed fees plus variable fees based on transaction price.Second,investment banks should pay attention to the construction and maintenance of their own reputation.When engaged in financial advisory business,they must perform their duties with due diligence,put forward effective suggestions and solutions from the perspective of the enterprise,and not damage long-term reputation for the benefit of the moment.Third,companies should use investment bank relationships with caution.When the investment bank develops financial advisory business,the two parties must act in strict accordance with the rules and regulations,and the company must ensure the safety of core assets.In addition,the company must comprehensively consider the opinions of other intermediary agencies,such as asset appraisal agencies,and collect opinions extensively to make the best decision.