The effect of stock mispricing timing on M&A performance and the role of payment method as a mediator: Evidence from Chinese firms

Abstract

This study examines the impact of stock mispricing timing on merger and acquisition (M&A) performance considering the mediating role of payment method by selecting Chinese A-share-listed companies from 2007 to 2021. This study uses a quantitative method based on multivariate regression analysis. The primary data collection technique used is an archival research method. The finding of this study is that stock mispricing timing significantly affects M&A performance. Announcing acquisitions during periods of stock overvaluation significantly enhances short-term market performance but may lead to diminished long-term market and financial performance. Conversely, acquisitions announced during periods of stock undervaluation are associated with less favourable short-term market performance but potentially foster long-term performance improvement. Payment methods partially mediate these effects with the stock payment method augmenting short-term performance and the cash payment method facilitating long-term performance. These findings underscore the importance of considering stock mispricing timing and payment method choice in M&A decisions to optimize overall performance outcomes. The study provides new evidence and perspectives on the impact of the capital market on the operation of the real economy  which has significant policy implications for the healthy development of the current Chinese capital market and M&A market.