Cross-organizational Appointment of Corporate Executives and Merger and Acquisition Decisions：Evidence on the Industry Association Perspective

Abstract

Merger and acquisition（M&A）is a very important financial decision-making activity of enterprises, and also a hot topic in China’s capital market now. The success of M&A will directly affect company value or shareholder wealth. Therefore, the information asymmetry in M&A has become a malignant tumor in the M&A market. Senior executives working in the “association” across organizations will enable enterprises to build a new social network, which may help to overcome the information asymmetry between master and target enterprises and improve the efficiency of effective identification of target enterprises.Evidenced on the listed companies of China’s A-share market in 2000-2015 as the research object, we analyze “association” executives across the organization at the size of the probability of successful M&A. It is found that corporate executives in the “association” across the organization will significantly increase the probability of successful M&A and the scale of M&A, and the influence is more significant in private enterprises and enterprises of high financing constraints. Further examination shows that the influence of executives’ cross-organizational position in the “association” on M&A probability and scale is only significant in national and provincial association organizations, but there is no result in the executive office of the municipal association. In addition, it is also found that executives’ cross-organizational position in the “association” can significantly improve corporate performance, market return and enterprise value after M&A, which further confirms, complements and strengthens that the impact of executives’cross-organizational position in the “association” on M&A decision-making will improve the company’s value effect.This paper not only enriches the literature on the influencing factors of M&A decision-making, but also provides new empirical evidence to solve the information asymmetry in M&A. Moreover, the subjects of sociology and public management are interdisciplinary with the research on corporate finance and accounting, which enriches the research objects in the fields of accounting and corporate finance, deepens and expands the literature on the influence of the “background” of corporate executives on corporate financial decision-making behavior, and provides a new perspective and explanation for the research on the social network of corporate executives, so it has a strong value and significance of policy application. In addition, the study provides necessary policy implications for regulators to identify the informal institutional factors behind M&A behaviors and strengthen the supervision on the M&A behaviors of listed companies, and provides references for social organization management departments to recognize and evaluate the functions of the “association”. All in all, this paper will improve and strengthen the management of social organizations.