Chinese Mergers and Acquisitions: Performance and Factors

Abstract

In this thesis, I reviewed the past mergers and acquisitions in China, calculated the acquirer post mergers short and long run performances, indentified the factors related to the performances, and discussed the possible reasons of these factors. Firstly, I reviewed past literature of mergers and acquisition. Especially, the Chinese merger and acquisition activity, including three subgroups: Chinese overseas merger, Chinese domestic mergers, and foreign overseas mergers. Second, I endeavour to review the past twenty years of M&A activity. I calculated the short and long abnormal return in different time intervals for the three subgroups and offered possible explanations for the results. I also classified different groups based on payment method, acquirer ownership, previous merger experience, target status, merger type, final completion status, and target listing status. Certain groups experience significantly higher abnormal returns than other groups, and different subgroups exhibit significantly different returns. Thirdly, I determined whether buyers are winners or losers and to identify the factors that affect buyer performance. Several newly recognized factors in the Chinese market, such as state owned ownership, final completion status, and momentum effect are applied in the analysis. Finally, I compared the post-merger results and differences in explanatory factors between different groups and markets with the results of other researchers. I used different time interval short and long run abnormal return as dependent variables. The independent variables were in three groups, including acquirer financial characteristics, deals unique characteristics and momentum effect factors. These factors have different impacts on different groups. In the short-term, financial factors, merger characteristics and previous performance have very limited effects on returns. The impacts of variables on short term abnormal return are largest for Chinese domestic mergers and acquisitions, moderate for foreign buyer mergers, and non-existent for Chinese overseas mergers. In the long run, these factors have more explanatory power.