Summary:
In recent years, China's capital markets have undergone extensive marketization reform. In particular, the reform of the mergers and acquisitions (M&A) market has received considerable attention from academics and practitioners. The material asset restructuring of listed companies in China's M&A market is a complicated and cumbersome process. The critical document guiding listed companies' material asset restructurings is “Measures for Administration of Material Asset Restructurings of Listed Companies” (hereafter referred to as “Restructuring Measures”). In this paper, we examine the effectiveness of the China Securities Regulatory Commission(CSRC) approval for the material asset restructurings of listed companies. The impact of this approval system of material asset restructurings remains controversial. Chinese restructuring market still has many problems, and it therefore needs supervision and guidance from the CSRC. First, the irrational investment of some listed companies increases the risk of restructuring and financial loss. Second, some majority shareholders may use M&A restructuring to infringe on the interests of small and medium shareholders. Third, Chinese investors have insufficient access to non-financial information reflecting the intrinsic value of enterprises, which makes it easy for listed companies to raise their stock prices through restructurings.However, the approval policy also has potential adverse effects. The policy increases the uncertainty of M&A transactions and reduces the efficiency of transactions. It is difficult to judge the fairness of asset pricing in regulatory practice. Direct comparisons of differences and whether they are subject to approval policy events may cause endogeneity problems. Transaction proposals that need to be submitted to the CSRC for approval are typically more significant, have higher underlying revenues, or are more likely to impact firms. Direct comparisons of the economic consequences of the two can have endogenous effects because of differences in characteristics. An amendment to the Restructuring Measures in 2014 provides a suitable control group for material asset restructurings. Prior to this amendment, all material asset restructurings had to be submitted to the CSRC for approval. In contrast, after this amendment, material asset restructurings using cash payments no longer had to be submitted to the CSRC for approval. Restructurings involving other payment methods still required CSRC approval. This event facilitates the identification of the causal relationship between the approval policy and the performance of material asset restructurings. Using the 2014 amendment of the Restructuring Measures as a quasi-natural experiment, we use Chinese A-share listed companies that engaged in M&A activities from 2007 to 2018 to evaluate the approval policy's role. The data are obtained from the CSMAR database. We find that the performance of material asset restructurings that no longer require approval is significantly lower after the relaxation of approval requirements compared with the control group. This finding is more significant for firms with higher agency costs and lower growth. In contrast, the relaxation of approval requirements helps higher-growth firms increase their value through restructuring. Material asset restructurings that no longer require approval after the relaxation are more likely to be cross-provincial and cross-country, but their performance is significantly lower. As far as we know, this paper is the first empirical study to demonstrate the effect of approval policies on material asset restructurings. Previous studies on the regulation of China's M&A market have either been qualitative or focused on other regulatory policies such as comment letters. This paper overcomes the endogeneity problem to a certain extent by using a difference-in-difference empirical design. This paper demonstrates the necessity of the marketization of China's M&A market and provides policy suggestions for category review to help balance the market and regulations.
李善民, 杨若明, 杨楠. 重大资产重组核准制效果研究[J]. 金融研究, 2022, 505(7): 190-206.
LI Shanmin, YANG Ruoming, YANG Nan. Research on the Approval System of Material Asset Restructuring. Journal of Financial Research, 2022, 505(7): 190-206.
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