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KEYWORDS
Listed real estate companies, Financial synergy effect, Empirical research
ABSTRACT
In recent years, the number and scale of M&A (merger and acquisition) of real estate companies have increased. The article studies whether M&A of real estate companies can create financial synergies. The sample is A-share listed companies in the real estate industry that had M&A in 2009 and 2010. The duration of observation starts from the previous year before M&A and the following two years. With the factor analysis, we find that listed real estate companies achieve positive financial synergies in the short run but this effect is not long lasting. The acquirer should consider the strategic acquisition purpose and focus on the full range of merger integration process.
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1 Introduction
China's macro-control policies of real estate tend to be severe and the market competition continues to be intensive. M&A has become an important means for the real estate company to expand scale, as well as increase their strength, efficiency and market competitiveness. The year of 2012 is the time that the real estate industry recovers rapidly. In 2013, the industry is still fairly active in M&A. The latest data from Zero2IPO Research Center show that the number of real estate M&A remains the first again among all the industries in the first quarter of 2013.
M&A becomes an effective means of capital operation and further development for the real estate company. To get financial synergy is the main motivation for companies to have M&A deals. The financial synergy can promote the real estate companies to achieve the desired results and enhance the competitiveness of the enterprises after M&A. Financial synergy refers to that the firm will create revenue in the collaborative process, including financial leverage effect, cost of capital effect and tax-saving effect.
In 2010, with tightening monetary policy, the real estate was short of funding sources. While the repeated national land policies focused on the regulation of the land market. The number of M&A of real estate industry showed growth spurt, which increased more than 3 times compared with 2009. In 2011, the real estate faced with internal and external difficulties because of the further control and more deteriorative environment....