WANG Wei, LU Shua：Industry Shocks,Government Control and Behavior of Enterprise Mergers

Abstract：Ultimate controlling shareholders of different natures exert different effects on the behavior of enterprise mergers. From the perspectives political cost and agency cost, this paper investigates the effects of government control on the specialized merger and diversified merger of enterprises, using the data from 2009 to 2013 of Chinese listed companies' mergers as samples. The results show that government controlled enterprises are prone to conduct specialized mergers, while non-government controlled enterprises are prone to conduct diversified mergers. Further studies show that under the effects of industry shocks, there is obvious characteristic of selectivity in government intervention. The government will allow the enterprises facing positive industry shocks to bear more political costs and the enterprises facing negative shocks to bear less; while the government controls only a few enterprises, it may even help enterprises in difficulty to maintain listed qualification so that they can continue to bear the political cost when they turn better.

Key words： Industry Shocks    Government Control    Specialized Merger    Diversified Merger

source:Finance & Trade Economics ,No.8,2015