An Empirical Analysis of the Effects of Horizontal Mergers and Acquisitions on the Performance of Chinese Listed Companies – The Case of the 2008 Global Financial Crisis

December 9, 2014 Posted by admin

Hui Li, Lu-Ping Le and Qing Zhang
School of Economics and Management, Zhejiang Normal University, JinHua, Zhejiang 321004,
China

Abstract
As a result of economic globalization, mergers and acquisitions of Chinese listed companies have become increasingly common. In fact, the most effective way of expanding the scale of operation and reducing competition is horizontal mergers and acquisitions. Whether horizontal mergers and acquisitions can effectively improve the performance of listed companies has been the question entrepreneurs are most concerned about. It is also what academics are focusing on, especially in the situation of 2008 global finical crisis. This article studies the available 24 Chinese listed companies in 2008 and examines the financial indicators of their operation performances before and after merger and acquisition during the 2008 global financial crisist. The article applies discriminant analysis to build a discriminant function. Finally, the function is used to analyze the merger and acquisition performance of the 14 Chinese listed companies in 2009 to demonstrate that the short-term performance of horizontal mergers and acquisitions is not so obvious and that it (the short-term performance) unstable. The empirical analysis is evaluated and some suggestions are made. The article constructs a discriminant function by integrating some financial variables. The discriminant function assesses the possibility of performance improvement after merger. In each of the case, when the value of the discriminant function is larger than 1, we conclude that the merger has improved firm performance. Otherwise, we conclude that the merger is not very useful in improving firm performance.

Keywords: Horizontal mergers and acquisitions; Performance of merger and acquisition; Chinese listed companies

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