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M&A Performance Involving Chinese Markets: Impact of M&A Financing Methods on Performance

Guo, Jiayi LU and Dong, Jiaqi LU (2024) NEKN02 20241
Department of Economics
Abstract
In the face of intense market competition, businesses often engage in M&A activities
to rapidly enlarge their market penetration to strengthen their industry position, thereby
gaining a competitive advantage and facilitating economies of scale, reducing per-unit
costs of production and management. Through M&A activities, companies can share
resources such as production facilities, research and development teams, and sales
networks, thereby improving operational efficiency. M&A, as forms of property
transactions, typically require substantial funds to complete. The acquiring companies
often need to swiftly raise funds through extensive external financing, making M&A
financing arrangements a critical factor in determining the results... (More)
In the face of intense market competition, businesses often engage in M&A activities
to rapidly enlarge their market penetration to strengthen their industry position, thereby
gaining a competitive advantage and facilitating economies of scale, reducing per-unit
costs of production and management. Through M&A activities, companies can share
resources such as production facilities, research and development teams, and sales
networks, thereby improving operational efficiency. M&A, as forms of property
transactions, typically require substantial funds to complete. The acquiring companies
often need to swiftly raise funds through extensive external financing, making M&A
financing arrangements a critical factor in determining the results of M&A deals.
Within the context of China's unique institutional framework, which is marked by
insider control and government intervention, and drawing on modern corporate finance
theory, capital structure theory under asymmetric information, and corporate control
theory, this study provides general logic for businesses to choose different financing
methods during M&A activities, for example debt financing and equity financing, and
investigates their impact on M&A performance.
According to theoretical analysis, this study analyzes the financing choices made by
acquirers and examines their impacts on extended and immediate market performance,
using M&A events from 2016 to 2020. The findings suggest that equity financing,
contrary to debt financing, significantly improves the financial performance of
acquiring companies. Moreover, from a temporal perspective, equity financing tends to
have more profound and enduring impact on the performance of acquiring firms. (Less)
Please use this url to cite or link to this publication:
author
Guo, Jiayi LU and Dong, Jiaqi LU
supervisor
organization
course
NEKN02 20241
year
type
H1 - Master's Degree (One Year)
subject
keywords
M&A performance, debt financing, equity financing
language
English
id
9164850
date added to LUP
2024-08-12 15:56:34
date last changed
2024-08-12 15:56:34
@misc{9164850,
  abstract     = {{In the face of intense market competition, businesses often engage in M&A activities
to rapidly enlarge their market penetration to strengthen their industry position, thereby
gaining a competitive advantage and facilitating economies of scale, reducing per-unit
costs of production and management. Through M&A activities, companies can share
resources such as production facilities, research and development teams, and sales
networks, thereby improving operational efficiency. M&A, as forms of property
transactions, typically require substantial funds to complete. The acquiring companies
often need to swiftly raise funds through extensive external financing, making M&A
financing arrangements a critical factor in determining the results of M&A deals.
Within the context of China's unique institutional framework, which is marked by
insider control and government intervention, and drawing on modern corporate finance
theory, capital structure theory under asymmetric information, and corporate control
theory, this study provides general logic for businesses to choose different financing
methods during M&A activities, for example debt financing and equity financing, and
investigates their impact on M&A performance.
According to theoretical analysis, this study analyzes the financing choices made by
acquirers and examines their impacts on extended and immediate market performance,
using M&A events from 2016 to 2020. The findings suggest that equity financing,
contrary to debt financing, significantly improves the financial performance of
acquiring companies. Moreover, from a temporal perspective, equity financing tends to
have more profound and enduring impact on the performance of acquiring firms.}},
  author       = {{Guo, Jiayi and Dong, Jiaqi}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{M&A Performance Involving Chinese Markets: Impact of M&A Financing Methods on Performance}},
  year         = {{2024}},
}