Financial Development, Dependence on External Financing and M&A
ZHOU Shou-hua1,2,WU Chun-lei1,ZHAO Li-bin3
1. School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China; 2. Accounting Society of China, Beijing 100045, China; 3. Accounting College,Wuhan Textile University, Wuhan 430200, China
Abstract Using mergers and acquisitions data of the listed companies during 2003-2013,this paper exams the adjustment effect of the China's financial development on the relationship between the firm's dependence on external financing and the mergers and acquisitions. The empirical evidence shows that the more dependence on external financing, the lower of the probability of mergers and acquisitions is. However, the financial development can alleviate the negative effect of dependence on external financing on the probability of mergers and acquisitions. When the value of financial development level (Credit Resources Market Index) is higher than 7.431, the financial development will enhance the probability of mergers and acquisitions because firms with higher dependence on external financing can more easily raise funds outside. This paper also finds that the higher of the local financial development in a region and the more active control over the markets, the greater the M & A market size, which means that the financial development affects the control over the market activity.
2016, Vol. 33 
