The impact of mergers and acquisitions of listed companies in China

Abstract

This paper analyzes the mergers and acquisitions (M&A) cases by Chinese listed companies. We use synthetic control method to study the short-term, medium-term and long-term impact on firms of domestic M&A in China. In the full sample, the empirical results show that sales growth rate and CAPEX to total assets decline, finance expense rate rises. For governance, there is not a significant change. Due to the differences in type of mergers and acquisitions, we divide the samples into M&A in different industries and M&A in the same industry. We find that in addition to sales growth rate and CAPEX to total assets, price-cost margin and governance also decreased, finance expense rate still increased in the sub-sample of M&A in different industries. In the sub-sample of M&A in the same industry, only governance degenerates. In sum, our results imply that mergers and acquisitions of Chinese listed companies can lead to lower sales and capital structure and higher operating costs, and the impact on companies varies with the type of mergers and acquisitions.