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A Study on Comprehensive Scoring Model for Related Party M&A performance of Listed Companies

Chengxiao Ren, Jun Mi

Related Party M&A of Chinese listed companies have some unique problems, so become a hot issue of universal concern of economists. This paper starts with the existing research results of the relationship between M&A behavior and the performance of listed companies at home and abroad, and builds a comprehensive scoring model based on principal component analysis method. This paper selects 100 listed companies that implemented related party M&A in 2011 from Shanghai and Shenzhen Stock Markets, and eventually establishes a comprehensive model which used for the seven main components and applied to calculate the score through empirical analysis of 13 performance indexes and date from these listed companies. The final comprehensive score results showed that the performance of Chinese listed companies that have implemented related party M&A decreased significantly in the M&A year, a year later there was a slight recovery. This suggests that indeed there are many improper operations in the related party M&A behavior of Chinese listed companies, which dampen the operating enthusiasm of the small shareholders and the majority of employees, resulting in a decline in performance after related party M&A.