| Mergers and acquisitions are the focus of capital market participants and a convenient way for companies to achieve rapid expansion.According to classical economic theory,M&A activities are a market supervision mechanism for agency problems.However,in reality,M&A activities may not be the end of the agency problem,but continue to exist as a manifestation of the agency problem.The research takes the Shanghai and Shenzhen A-share listed companies from 2006 to 2016 as a sample in this paper and finds that managers expects to build a "business empire" or increase salaries through M&A,the discretionary control over the company’s free cash flow makes it prone to overinvestment,reducing merger performance and harming shareholders’ equity.That is,management power has negative impact on M&A performance.In an incompletely efficient market,the financing decisions of companies will affect investment decisions.Debt financing restricts the opportunistic behavior of managers through below ways:limiting the investment tends via restrictive clause in debt contracts,restricting free cash flow caused by repayment of principal&interest and financial crisis risk,supervising finance and operation effectively,taking over control caused by debt default risk.According to the different sources of debt financing,this article explores the differences in the influence of bank loans and commercial credit loans on the management agency behavior of overinvestment.The research in this paper finds that state-owned banks have hardened the budget constraints of borrowing companies,generates stronger motivation and ability to effectively supervise the finance and operation of borrowing companies.Therefore,commercial banks can play an active role in corporate governance,means that bank loans have a negative regulatory effect on the relation between management power and M&A performance.Further research found that there are differences in the regulatory effects of bank loans with different maturity structures.The negative regulatory effect of short-term bank loans are mainly realized by weakening the relationship between the management’s independent decision-making power and M&A performance,however,the negative regulatory effect of long-term bank loans are mainly achieved by weakening the management’s board power and M&A.In addition,low-cost commercial credit helps companies choose the best among richer project alternatives,widens the gap between financing costs and investment income,and improves M&A performance.With the increase of management power,the company’s internal governance mechanism will be more unbalanced,and the promotion of commercial credit financing on M&A performance will be weaker.It means that management power has a negative regulatory effect on the relationship between commercial credit financing and M&A performance.Therefore,this article provides a new way to restrain the agency problem of management in mergers and acquisitions,that is,to introduce banks with active corporate governance functions and commercial creditors with low financing cost. |
