The Impact Of Equity Incentive On M&A Performance

At present,M&A has become an effective measure for enterprises to realize expansion,transformation and development.The state has also issued relevant policies and measures to vigorously promote enterprises to integrate resources and improve competitiveness through merger and acquisition.With the support of economic globalization and relevant national policies and measures,many enterprises have improved their competitiveness in this way,and China’s merger and acquisition market is full of vitality.On the other hand,there are hidden dangers in the market,such as inadequate market supervision,blind merger and acquisition activities of many enterprises and lack of effective integration after merger and acquisition,which lead to the failure of enterprises to achieve the expected merger and acquisition performance.As an incentive mechanism,equity incentive,combined with merger and acquisition,has brought opportunities for enterprise development.equity incentive can make the interests of management and shareholders tend to be consistent,selects appropriate objectives and make correct decisions.it can also improve the enthusiasm of employees on both sides,accelerate the integration of resources after merger and acquisition,make the activities complete smoothly and improve performance.In view of the importance of equity incentive for corporate merger and acquisition,this thesis studies the impact of equity incentive on M&A performance.This thesis first expounds the relevant theories of merger and acquisition and equity incentive,analyzes the logical mechanism of equity incentive affecting M&A performance.It selects the M&A events of A-share listed companies from 2014 to 2018 for empirical research,and demonstrates that equity incentive improves M&A performance from the perspective of two types of agency costs.Then,the thesis selects the event of Baosteel’s acquisition of Wuhan Iron and Steel Corporation as the research object,analyzes the two equity incentives schemes of Baosteel,and discusses its role in improving the performance of M&A.To be specific,this thesis discusses the impact of the two restricted stock incentive plans of Baosteel,analyzes the M&A performance from the perspectives of financial performance and non-financial performance,and analyzes the internal and external channels for equity incentive to improve M&A performance.Finally,based on the results of empirical and case studies,this thesis puts forward relevant policy suggestions.The main conclusions of this thesis are as follows: First,based on the incentive theory and principal-agent theory,according to the internal channels,equity incentive can inspire executives to enhance performance for income,protect the interests of minority shareholders,alleviate the information asymmetry and improve the risk bearing ability of management.According to external channels,equity incentive sends a positive signal to the market and enhances the confidence of management and shareholders.Therefore,equity incentive can improve the performance of merger and acquisition by reducing two types of agency cost.Based on the case study of Baosteel’s acquisition of Wuhan Iron and Steel Corporation,equity incentive mainly improves M&A performance from incentive mechanism,risk-taking mechanism and signal transmission mechanism.Baosteel scientifically determined the share exchange ratio and price of the incentive scheme,reasonably adjusted the ownership structure and shareholder shareholding ratio,strictly implemented the dividend provisions,actively disclosed information,and alleviated the agency problem.The combination of M&A and equity incentive sends a positive signal for the healthy development of the company in the future.However,due to the late development of equity incentive in China,the equity incentive scheme needs to be optimized.Finally,from the perspective of enterprises and countries,this thesis puts forward enlightenment and suggestions: Firstly,scientifically formulate the equity incentive scheme;Secondly,pay attention to the integration after merger and acquisition;Thirdly,improve the internal supervision mechanism;Finally,improve relevant laws and regulations.