Research on Performance and Valuation of Enterprises Placarded by Others Based on the Improved Panel Vector Auto-Regression Model

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1 Applied Economic and Finance Vol. 5, No. 3; May 2018 ISSN E-ISSN Publihed by Redfame Publihing URL: Reearch on Performance and Valuation of Enterprie Placarded by Other Baed on the Improved Panel Vector Auto-Regreion Model Na Luo Correpondence: Na Luo, School of Banking and Finance, Univerity of International Buine and Economic, Beijing, China. Received: February 9, 2018 Accepted: March 8, 2018 Available online: March 18, 2018 doi: /aef.v5i URL: Abtract In recent year, enterprie, which were placarded, have become a heated iue in the econdary market in China. However, there till lack reearche about the performance and valuation of thoe enterprie which were placarded. Therefore, it eem that it i lack of peruaion to ue the word barbarian to define the enterprie which carry out placard. For the reaon above, thi paper make the ue of the improved PVAR model to give an empirical analyi on the performance and valuation of the enterprie placarded, baed on the ample between 2011 and Firt, thi paper divide the whole ample into two ubample group by the dummy variable, according to the certain point of time whether the enterprie ha been placarded. After that, it build two PVAR model combining the performance indicator and the valuation indicator. The reult how that the enitivity of the target enterprie performance i not a good a it valuation. Second, the two ubample group are analyzed by the impule repone function. It explain that placard create an incentive effect for the target enterprie in the hort term. Third, by uing the variance decompoition, thi paper achieve a concluion that placard reduce the dependence of the target enterprie on the apect of it valuation, profitability, ize and rik. Therefore, placard i a good ignal for thoe target enterprie on the whole, which bring a nice momentum for the enterprie on the valuation, profitability, ize and rik in the hort term. In the long run, the enterprie will adjut to a table tate baed on the hort-term change. From thi point of view, barbarian at the gate bring the motivation rather than chao. Keyword: placard, improved PVAR model, GMM etimation, impule repone function, variance decompoition 1. Introduction Placard mean an act that a hareholder need to report to related intitution when he increae hare of one lited company to more than 5% in the econdary ecuritie market. In recent year, placard ha been a heated dicuion in dometic capital market. Epecially in 2015, inurance companie carried out placard toward lited companie on a maive cale, which caued a lot of attention beide the dramatic up and down in the tock market. After that, the econdary ecuritie market put on a placard upurge of private fund and retail invetor. In fact, placard i not an emerging new term in recent year. Since the hare plit reform in 2005, placard ha become an increaingly active role in the market. There are 230 placard event in the econdary market between 2006 and However, there are few reearche about the target enterprie which are placarded, o it i of great ignificance to focu on thi iue and analyze thee enterprie in the econdary market. The word barbarian i uually ued to define the enterprie which carry out placard. Thee enterprie alway increae hare of the target companie at the right time, o they behave a the barbarian at the gate. However, it eem too negative to ue the word barbarian to define them. On the one hand, they add lot of vitality to the tock market, and on the other hand, the placard effect on the performance and valuation of the target company can not be imply ummed up in term of the purpoe of the placard executor. 1.1 Foreign Literature In foreign reearch, Kumar(1985) tudied more than 2000 placard cae from 1960 to 1976 by uing linear regreion, which found that mot of the target companie have a declined performance. Gugler, Muelle and Yurtoglu(2003) focued on 429 overea M&A ample from America, Japan and Britain between 1981 and 1998, and found the total profit of large enterprie had increaed ignificantly after M&A. Love and Zicchino(2006) etablihed PVAR model to analyze the impact of corporate financial ituation on it invetment behavior in 36 countrie, in which they divided 34

2 the ample into two ubample group according to the level of financial development. Aziz N.Berdiev and Jame W.Saunori(2016) explored the dynamic relationhip between financial development and hadow economy in 161 countrie by impule repone function of panel vector auto-regreion model, which found financial development ha weakened the cale of hadow economy. Rekha Rao-Nicholon, Julie Salaber and Tuan Hiep Cao(2016) analyzed the financial data of target companie after it M&A in ASEAN countrie from 2001 to 2012, achieving that operation achievement tended to decline after 3-year adjutment, and thee companie eemed to perform better during financial crii than any other period of time. After that, they concluded the relative goal of company, trannational nature of the tranaction, cah reerve of the acquirer, and friendline of the tranaction are the important determinant of the buine performance after M&A, during the crii. 1.2 Dometic Literature On the bai of dynamic panel model, Lei Hui, Shao Huawei, Li Ai(2010) found the M&A of lited companie in low carbon indutry i beneficial to increae the labor demand of the company. The model in thi paper introduced dummy variable to meaure the occurrence of M&A during the fical year, aiming at avoiding the inconitency of individual data during the invetigation. In the reearch conducted by Sun Xin(2011), it concluded the increae of hare proportion of major hareholder would bring a poitive impact on the tock price of the lited company. By tudying the tock event, Wu Jianan(2012) analyzed the hort-term performance of M&A of Chinee lited pharmaceutical companie between 2005 and Then he came up with a nonparametric model of panel data, which wa ued to analyze the long-term performance of M&A in thi kind of companie. It turned out that the hort-term performance of lited pharmaceutical companie had been improved after M&A, while in the middle and long term, the performance had not improved but overall efficiency and technical efficiency had increaed. He Jing, Xu Longbing(2012) found the performance of lited companie placarded by other had improved and the hare of product market had enhanced, with the indutrial capital infiltrating into the financial capital. By analyzing the tock event, Yang Yang(2013) came to a concluion that enior executive of lited companie increaed their hare baed on the market for great majority, rather than the corporate performance and development ability. Zuo Wenwen(2013) ued a mixed ection model of panel data, including unit root tet and decriptive tatitic, to ummarize the relationhip between executive payment and corporate performance, enterprie cale, board ize, proportion of independent director, proportion of tate-owned hare and region repectively. Pang Jiang(2014) focued on the lited companie with change in the proportion of hare in 2009, with the reult that the change of hare of major hareholder were time-related, baed on the performance of different tock. Meanwhile, on the bai of principal component analyi, it turned out that if major hareholder increaed their hare, the company would meet a decline in performance, and vice vera. Later in the reearch conducted by Lv Pin(2014), event tudy, paired ample T tet and multiple regreion were ued to analyze the placard event in A tock market during 2008 and The reult uggeted that placard made a decline in target companie performance, and the impact of company growth, olvency and ize on placard wa unobviou, while the ownerhip tructure and Tobin Q had a ignificant impact on placard. Chen Yongxue(2016) ummarized two repreentative placard cae about Qinhuangdao Maoye and Linghi Invetment, with M&A and trategic long-term invetment motive repectively. By comparing different indexe, the paper proved that two kind of motive can both optimize the reource and tructure of the target companie, and improve their value. On the bai of endogenou effect, Luo Chengde(2016) ued the fixed effect panel data imultaneou equation to analyze the relationhip between payment gap and buine performance, which took reearch and development trength into conideration. After acquiring the related data of lited companie from 2012 to 2014, he howed the impact of payment gap and reearch and development trength on the corporate performance. 1.3 Literature Review The achievement of foreign reearche and dometic reearche hare few reemblance in reult, and mot of dometic reearche concentrated on principal component analyi and paired ample T tet. It eem that there are lack of reearche about placard effect on corporate performance and valuation by uing PVAR model, and previou tudie how no rigorou ample election and ditinction, which may bring a ignificant impact on the reult. Therefore, baed on the advantage of PVAR model, the paper introduce dummy variable to etablih an improved PVAR model, uing financial indexe and valuation indexe to analyze the change in corporate performance and valuation. With the reult of the model, we can come to a concluion whether the barbarian at the door bring motivation for the target company or not. In thi way, we can make full ue of the trength of quantitative finance and corporate finance to achieving a more convincing concluion. A for major hareholder and invetor, the reult can ait them to identify valuable invetment and future development pattern of target companie. For thoe target companie which have been placarded, they can pecify the direction for future corporate governance and development baed on the reult. The paper etablihe a ytem that examine the change in performance and valuation of lited companie which have 35

3 been placarded. For it trong applicability, the ytem can be ued not only in the field of corporate finance, but alo in different field at home and abroad. By changing the variable in the model and the lagged order, we can reach different reearch purpoe, which provide a helpful tool for the tudy of panel data. 2. Selection of the Sample and Indexe 2.1 Selection of the Sample The paper deal with the problem of corporate performance and valuation of the lited companie which have been placarded. However, it may be a long-term proce to make the impact of placard on the target company performance come into effect. If we jut ue the data of one eaon to tudy the iue, the model wouldn t perform well by the elected ample. Therefore, the paper eliminate thoe lited companie placarded in 2016 for the firt time, in order to make the data period long enough. The data we ued in thi paper come from WIND data terminal. With a full conideration of variou ample, thi paper concentrate on tudying the hypotatic companie in the indutrial capital. In 2005, the hare plit reform came into effect, o I regard the year 2005 a tarting point of our reearch. Therefore, the target companie which have been placarded in Chinee econdary ecuritie market from 2006 to 2015 are ummarized in thi paper. Once the ame company wa repeatedly placarded during the reearch period, the firt announcement time wa regarded a the reearch time point, which enure the reearch time would not overlap for a ingle company. With the need of thi reearch, the paper firt elect ample baed on the following tandard. Firtly, the cae that non-major hareholder and non-enior executive increae their hare through pecial trade uch a repo tranaction are excluded from the ample. Secondly, the placard cae that do not happen in the econdary market are excluded from the ample. For example, if the tranaction i carried out by free tranfer or judicial tranfer, it will not be included in the target ample. Thirdly, after the firt placard announcement, if the tock appear upended for a long time or the tock price i influenced by ome major matter, uch a high proportion of ex-right, affiliate tranaction, aet reorganization and o on, the correponding company will be excluded from the ample. Since long-time upenion or major matter will affect the corporate performance and valuation more or le, the effectivene of the concluion will be unconvincing if thee type of companie are included in the ample. Fourthly, financial lited companie are excluded from the ample, for the reaon that the operation achievement hare great difference between financial lited companie and other lited companie. Fifthly, thoe lited companie which have been marked ST or * ST are excluded from the ample. Conidering thee companie may avoid deliting through elling fixed aet or creating financial fraud under the circumtance of continuou loe, it i not worth tudying thi kind of profit ariing from non-main buine. Sixthly, the companie with no tranaction data within 15 day after firt placard announcement are excluded from the ample. According to the tandard above, 173 lited companie are ummarized a the ample between 2006 and The number of placard cae of each year i hown in Table 1. Table 1. The number of placard cae in Chinee econdary ecuritie market between 2006 and 2015 Year Number Total 173 According to the and number of placard cae of each year ince 2006, in thi paper, the companie which meet it firt placard from January 1, 2011, to December 31, 2015, are elected a the final ample, o a to keep the continuity of the ample interval and the feaibility of the reearch. The corporate performance and valuation of ample companie may have a lag in repone to placard. Therefore, baed on the availability of data, thi paper elect the financial data of the target companie from the econd quarter of

4 to the third quarter of 2016 a the ample data. Then the companie with abnormal financial data or miing data are excluded from the ample. At lat, I elect 135 companie a the final ample. The reult of ample election are how in Table 2. Table 2. The number of ample companie in each year between 2011 and Sample Ditribution Statitic Year Number Total 173 The ample companie can be claified into different group a below, baed on the tock exchange and the indutry. Table 3. Sample ditribution baed on the tock exchange Stock exchange Number Proportion Shanghai Stock Exchange % Shenzhen Stock Exchange % Total % Table 4. Sample ditribution baed on the indutry Indutry Number Proportion Material % Real etate % Utility % Technical hardware and equipment % Retail % Media % Durable conumer good and clothing % Energy % Automotive and automotive component % Software and ervice % Buine and profeional ervice % Food, drink and tobacco % Retail of food and main product % Conumer ervice % Medical and healthcare equipment and ervice % Tranport % Pharmaceutical, biotechnology and life cience % Capital good % Total % A the reult preented above, there are 65 companie lited in Shanghai Stock Exchange and 70 companie lited in Shenzhen Stock Exchange, which indicate that the ample ditribute averagely. Although the number of ample varie acro indutrie, the ample are widely ditributed in different indutrie, which effectively enhance the repreentativene and univerality of the concluion in thi paper. 2.3 Data Indexe Company Performance Indexe According to the characteritic of lited companie, the paper meaure the company performance from profitability, company ize and company rik, and then etablih an evaluation ytem of company performance by electing appropriate indexe from thee three apect repectively. The reult to thee indexe are hown in Table 5. Table 5. Company performance indexe Firt-level indexe Second-level indexe Repreentative ymbol Profitability Earning per hare EPS Profit margin on net aet ROE Company ize Main buine income MI Total aet TA Company rik Debt to aet ratio DAR 37

5 2.3.2 Company Valuation Indexe In thi paper, the market value of company i ued a an index of company valuation, which refer to the total value of the tock iued by a lited company baed on the market price. In order not to be influenced by the dividend ditribution in the ample, the paper firt narrow the gap of previou ex-right baed on the preent market value of the company. 3. Empirical Analyi 3.1 Variable Analyi Variable Decription The paper etablihe an improved panel-data vector auto-regreion model, namely PVAR model, to conduct an empirical analyi on the performance and valuation of the companie which have been placarded. In order to olve the problem of individual non-equilibrium in the ample, the PVAR model introduce a dummy variable to analyze the placard effect. If the company i placarded at a certain point of time, then the dummy variable equal 1. Otherwie, the dummy variable equal 0. In order to linearize the developing trend of the variable and reduce the potential heterocedaticity of the panel data, the paper doe logarithm treatment on the quantitative data. The variable ued in thi paper are hown in Table 6. Table 6. Variable decription Data Analyi Variable lnmv it EPS it lnta it DAR it ROE it lnmi it c it Decription Natural logarithm of market value of company i at time t Earning per hare of company i at time t Natural logarithm of total aet of company i at time t Debt to aet ratio of company i at time t Profit margin on net aet of company i at time t Natural logarithm of main buine income of company i at time t Dummy variable The final ample in thi paper contain 135 companie. In order to overcome the influence of outlier and control the lo of the ample data after proceing, trim truncation i performed at 1% and 99% quantile by Stata11.0. The tatitic reult of the final ample are hown in Table 7 and Table 8. Table 7. Statitical characteritic of variable of Panel A Panel A:After placard Variable Mean Standard Upper Lower Minimum Median deviation quartile quartile Maximum lnmv EPS lnta DAR ROE lnmi Table 8. Statitical characteritic of variable of Panel B Panel B:Before placard Variable Mean Standard Upper Lower Minimum Median deviation quartile quartile Maximum lnmv EPS lnta DAR ROE lnmi The tatitic indicator of ix variable all become larger when uing the after-placard data. To a certain extent, it reflect placard ha optimized the profitability of the company, enlarged the company ize, and increaed the company rik at the ame time. However, it can only explain the overall ituation of the company for a period of time before and after placard, which fail to repreent the repone to placard in each period. 3.2 Model Etablihment Thi paper ue a panel-data vector auto-regreion method to tudy the placard effect on corporate performance and 38

6 valuation of the target companie. Thi kind of method combine the traditional VAR approach, which treat all the variable in the ytem a endogenou, with the panel-data approach, which can more truly reflect the relationhip between the variou variable and allow for unoberved individual heterogeneity and time effect. By combining the advantage of time erie model, ection data model and panel data model, it provide an effective method for analyzing the dynamic repone f target variable when receiving impact. The PVAR model, firt put forward by Holtz-Eakin in 1988 and later developed by expert and cholar uch a Kao, Joakin Weterlund and o on, ha become an ideal model for panel data. T tand for the length of the time erie, and n tand for the length of the hyterei term. In the PVAR model, a long a the condition T n 3 i atified, the unknown parameter can be etimated through the equation. In addition, the parameter of hyterei term can be etimated under teady tate when the condition T 2n 2 i atified. The PVAR model i mainly compoed of the following three part. The firt i to determine the lagged order and complete GMM etimation, with the purpoe of reflecting the regreion relationhip between variable. The econd i to etimate the impule repone function and draw the function image, aiming at oberving the repone of each target variable after receiving impact. The third i to complete the variance decompoition of prediction error, in order to meaure the change of the error influenced by the variable itelf or other variable in the prediction. The PVAR model firt remove the individual effect within the ample by forward difference method and eliminate the time effect on the bai of the mean value in the group. After that, it carrie out the regreion calculation and tet. Traditional PVAR model ha ome limitation in data proceing, calculation and o on. Thee limitation are mainly embodied in the following apect. Firtly, the traditional model focue on the name of cro-ectional variable, which limit the flexibility of the variable. Secondly, the mean effect within the group i not eliminated in the traditional model. Thirdly, impule repone function and variance decompoition can not be flexibly adjuted, for the period in the model i retricted. Fourthly, the traditional model i limited by the firt-order lag. On the bai of the limitation of the traditional model, the improved PVAR model ued in thi paper can not only eliminate the retriction of variable, the individual effect and the time effect of the ample, but alo improve the election of the lagged order, impule repone function and variance decompoition, which make the model more ubtantial Theoretical Model Setting By uing the indexe of profitability, ize, rik and valuation, the paper etablihe an improved PVAR model, and ue Stata11.0 to perform it. A firt-order VAR model i pecified a follow. p Zit 0 jzi, t j fi dit et (1) Where it j 1 Z i a ix-variable vector, containing all endogenou variable in the model ytem, namely ln MVit, EPSit,ln TAit, DARit, ROEit,ln MI it. f i tand for individual heterogeneity, ued to meaure individual effect, and d it i a time dummy variable, ued to meaure time effect. The order of variable in the vector i arranged baed on the aumption that the value and earning are affected firt, and then the capital change. When the new capital i ued for new invetment, it will affect the company income. The aumption form on the bai of the following reaon. Firt of all, the mot obviou impact of placard on company i the total market value in the hort term, for the reaon that the total market value i influenced by the tock price and the number of tock, and placard often bring about a change in the capital tock. Second, becaue earning per hare are equal to the net profit of company divided by the number of tock, the change in capital tock will affect the earning per hare. Third, the item related to the company aet may change becaue of placard, which lead in the change of invetment. However, the company often need ome time to fully operationalize the new capital, o the return may have ome delay. Lat but not leat, the increae in invetment may lead to change in the income of the company. Therefore, the variable in the model not only repreent the company financial information, but alo indicate the potential relationhip within them. One of the limitation we need to impoe when applying panel data to a VAR model i that each cro-ectional unit i the ame, but it i quite impractical in practice. Therefore, by introducing a fixed effect that allow for individual heterogeneity in the variable, the model can olve the limitation above well. Becaue the fixed effect i related to the lag of variable, conidering the mean difference method uually produce the a deviation coefficient when eliminating the fixed effect, the paper remove the individual effect within the ample by forward difference method, which i called Helmert proce. It remove only the forward average value, which i the average value of future obervation available for each buine year. In thi way, we can preerve the orthogonality between tranformed and lagged 39

7 variable, and then we can ue the lagged variable etimated by GMM a the tool variable to obtain the correponding regreion coefficient Etimated Reult By introducing the dummy variable, the model i divided into PVAR-A model and PVAR-B model. The former one ue the data of the company after placard, and the latter one adopt the data before the company i placarded. When performing GMM etimation, we need to eliminate the individual effect and time effect in PVAR model. Thi paper remove the individual effect by forward difference method and eliminate the time effect by in-group mean difference method on the cro ection. On the bai of AIC, BIC and HQIC criteria, the mot proper lag order of PVAR-A model and PVAR-B i 2. The etimated reult of PVAR-A(2) and PVAR-B(2) are hown in Table 9 and Table 10. Table 9. Reult of PVAR-A(2) PVAR-A:PVAR model after placard Repone of: h_lnmv Repone of: h_eps Repone to Coefficient t tatitic Repone to Coefficient t tatitic L.h_lnMV 0.589*** 9.27 L.h_lnMV 0.66 L.h_EPS L.h_EPS 0.601*** 5.61 L.h_lnTA L.h_lnTA L.h_DAR L.h_DAR L.h_ROE L.h_ROE 2.394*** 5.67 L.h_lnMI L.h_lnMI L2.h_lnMV 0.295*** 5.95 L2.h_lnMV L2.h_EPS L2.h_EPS L2.h_lnTA ** L2.h_lnTA * L2.h_DAR 0.419* 1.91 L2.h_DAR L2.h_ROE L2.h_ROE ** L2.h_lnMI L2.h_lnMI -3* Repone of: h_lnta Repone of: h_dar Repone to Coefficient t tatitic Repone to Coefficient t tatitic L.h_lnMV 0.23 L.h_lnMV L.h_EPS L.h_EPS L.h_lnTA 0.618*** 3.99 L.h_lnTA L.h_DAR 0.860* 1.89 L.h_DAR 0.689*** 5.22 L.h_ROE L.h_ROE L.h_lnMI L.h_lnMI L2.h_lnMV 0.078* 1.94 L2.h_lnMV L2.h_EPS L2.h_EPS L2.h_lnTA L2.h_lnTA L2.h_DAR L2.h_DAR L2.h_ROE L2.h_ROE L2.h_lnMI 1.01 L2.h_lnMI Repone of: h_roe Repone of: h_lnmi Repone to Coefficient t tatitic Repone to Coefficient t tatitic L.h_lnMV L.h_lnMV L.h_EPS L.h_EPS L.h_lnTA L.h_lnTA L.h_DAR L.h_DAR L.h_ROE 0.716*** 3.68 L.h_ROE L.h_lnMI L.h_lnMI ** L2.h_lnMV L2.h_lnMV 0.348*** 3.26 L2.h_EPS -4* L2.h_EPS L2.h_lnTA L2.h_lnTA 0.513*** 3.18 L2.h_DAR L2.h_DAR L2.h_ROE L2.h_ROE L2.h_lnMI L2.h_lnMI *** N 987 AIC BIC HQIC * p<0.1, ** p<0.05, *** p< 40

8 A can be een from Table 9, the market value of a company i not only poitively affected by it value of the firt-order lag and the econd-order lag, but alo ignificantly influenced by the total aet and debt to aet ratio of the econd-order lag. The impact from the total aet i negative, while the influence from debt to aet ratio i poitive. To a certain extent, it indicate that the larger the total aet of the previou two period or the lower the debt to aet ratio of previou two period, the lower the current market value. A for other variable, the reult above alo how that they will be ignificantly affected to variou degree by the variable itelf or other variable. Table 10. Reult of PVAR-B(2) PVAR-B:PVAR model before placard Repone of: h_lnmv Repone of: h_eps Repone to Coefficient t tatitic Repone to Coefficient t tatitic L.h_lnMV 0.968*** L.h_lnMV L.h_EPS L.h_EPS 0.723*** 6.85 L.h_lnTA L.h_lnTA L.h_DAR L.h_DAR L.h_ROE L.h_ROE 1.876*** 7.86 L.h_lnMI ** 2.45 L.h_lnMI L2.h_lnMV *** L2.h_lnMV L2.h_EPS L2.h_EPS L2.h_lnTA L2.h_lnTA * L2.h_DAR L2.h_DAR L2.h_ROE L2.h_ROE *** L2.h_lnMI 0 - L2.h_lnMI Repone of: h_lnta Repone of: h_dar Repone to Coefficient t tatitic Repone to Coefficient t tatitic L.h_lnMV L.h_lnMV L.h_EPS L.h_EPS 0.036* 1.88 L.h_lnTA 0.845*** L.h_lnTA L.h_DAR L.h_DAR 0.824*** L.h_ROE L.h_ROE L.h_lnMI L.h_lnMI L2.h_lnMV L2.h_lnMV L2.h_EPS L2.h_EPS 1.28 L2.h_lnTA L2.h_lnTA L2.h_DAR L2.h_DAR L2.h_ROE 1 L2.h_ROE ** L2.h_lnMI L2.h_lnMI 1.05 Repone of: h_roe Repone of: h_lnmi Repone to Coefficient t tatitic Repone to Coefficient t tatitic L.h_lnMV L.h_lnMV 0.511*** 2.66 L.h_EPS L.h_EPS L.h_lnTA L.h_lnTA L.h_DAR L.h_DAR L.h_ROE 0.854*** 7.32 L.h_ROE L.h_lnMI L.h_lnMI *** L2.h_lnMV L2.h_lnMV *** L2.h_EPS *** L2.h_EPS L2.h_lnTA L2.h_lnTA 0.485** 2.06 L2.h_DAR L2.h_DAR L2.h_ROE ** L2.h_ROE L2.h_lnMI L2.h_lnMI *** N 1339 AIC BIC HQIC * p<0.1, ** p<0.05, *** p< A we can ee from Table 10, before placard, the market value of the target lited companie i not only poitively affected by it value of the firt-order lag and negatively affected by it value of the econd-order lag, but alo ignificantly influenced by the main buine income of the firt-order lag, which how great difference with Table 9. With or without the placard, earning per hare, total aet, debt to aet ratio and profit margin on net aet variable all have relatively imilar impact on themelve and other variable. However, the main buine income before the 41

9 placard how a more ignificant enitivity to the previou market value of the company, while it doe not how the imilar performance after the placard. Thi how that the influence of placard on the main buine income i lagging behind, and the mot enitive repone to the placard lie in the market value. Therefore, for the target companie, the impact of the lag valuation on the current value ha changed after placard, with the poitive impact of the firt-order lag value and negative impact of the econd-order lag value before placard changing into the poitive influence of thee two lag period after placard. However, the poitive impact of the firt-order lag after placard i maller than that before placard, which indicate that placard ha weakened the target company reliance on it previou market value. Simultaneouly, the valuation of the target company i cloely related to the company ize and rik after placard, while the valuation i only cloely aociated with the company ize before placard. In addition, the change in company ize after placard i lagging behind, and the enitivity of company profitability, ize and rik to placard i not a good a the company valuation. 3.3 Impule Repone Function Analyi The impule repone function decribe the impact of unit random diturbance on other variable, which intuitively reflect the dynamic interaction, effect and the implied time lag relationhip between variable. Firtly, the reult of impule repone function of PVAR-A(2) model i hown in Figure 1, with 95% confidence interval. Baed on the GMM etimation of PVAR-A(2) model, the paper will focu on the impact of the other five variable on the impule repone of the market value. The market value increae in repone of an earning per hare hock, a hown in Figure 1(IRF of EPS to lnmv). The 95% confidence interval i above 0 at thi point, which indicate the earning per hare of the company ha a ignificant impact on it market value in the firt period after placard. However, the effect i apparently weakened in the econd period, and a time pae by, the impule effect become maller and maller. A hown in Figure 1(IRF of lnta to lnmv), the 95% confidence interval i above 0 during the firt five period, which illutrate the market value increae in repone of a total aet hock after placard, and the poitive impact i ignificant at leat in five period. However, the market value will not be ignificantly affected by a debt to aet ratio hock in the firt ix period, a hown in Figure 1(IRF of DAR to lnmv). The market value increae in repone of a profit margin on net aet hock, a hown in in Figure 1(IRF of ROE to lnmv), which i generally imilar with earning per hare, but in the firt period, the impule effect of profit margin on net aet i maller than the earning per hare in the firt period. The impule effect of the main buine income on the market value of the company hare a great difference from other variable above. At firt, the main buine income doe not perform poitive impact on the market value until the econd period. However, the impact quickly decay in the third period and remain unapparent in the following three period. Secondly, the reult of impule repone function of PVAR-B(2) model i hown in Figure 2, with 95% confidence interval. The paper will alo focu on the impact of the other five variable on the impule repone of the market value. A hown in Figure 2(IRF of EPS to lnmv), the market value increae in repone of an earning per hare hock in the firt period before placard. However, the poitive impact i no longer ignificant ince the third period, which i imilar with the performance after the target companie are placarded. Figure 2(IRF of lnta to lnmv) how that the impule effect of total aet on the market value only perform poitively in the firt period, and the effect dramatically decay in the following period, which i quite different 42

10 Impule-repone for 2 lag VAR of lnmv EPS lnta DAR ROE lnmi IRF of lnmv to lnmv IRF of EPS to lnmv IRF of lnta to lnmv IRF of DAR to lnmv IRF of ROE to lnmv IRF of lnmi to lnmv IRF of lnmv to EPS IRF of EPS to EPS IRF of lnta to EPS IRF of DAR to EPS IRF of ROE to EPS IRF of lnmi to EPS IRF of lnmv to lnta IRF of EPS to lnta IRF of lnta to lnta IRF of DAR to lnta IRF of ROE to lnta IRF of lnmi to lnta IRF of lnmv to DA R IRF of EPS to DAR IRF of lnta to DAR IRF of DAR to DAR IRF of ROE to DAR IRF of lnmi to DAR Error are 5% on each ide generated by Monte-Carlo with 1000 rep IRF of lnmv to ROE IRF of EPS to ROE IRF of lnta to ROE IRF of DAR to ROE IRF of ROE to ROE IRF of lnmi to ROE IRF of lnmv to lnmi IRF of EPS to lnmi IRF of lnta to lnmi IRF of DAR to lnmi IRF of ROE to lnmi IRF of lnmi to lnmi Figure 1. Impule repone for PVAR-A(2) model Impule-repone for 2 lag VAR of lnmv EPS lnta DAR ROE lnmi IRF of lnmv to lnmv IRF of EPS to lnmv IRF of lnta to lnmv IRF of DAR to lnmv IRF of ROE to lnmv IRF of lnmi to lnmv IRF of lnmv to EPS IRF of EPS to EPS IRF of lnta to EPS IRF of DAR to EPS IRF of ROE to EPS IRF of lnmi to EPS IRF of lnmv to lnta IRF of EPS to lnta IRF of lnta to lnta IRF of DAR to lnta IRF of ROE to lnta IRF of lnmi to lnta IRF of lnmv to DA R IRF of EPS to DAR IRF of lnta to DAR IRF of DAR to DAR IRF of ROE to DAR IRF of lnmi to DAR Error are 5% on each ide generated by Monte-Carlo with 1000 rep IRF of lnmv to ROE IRF of EPS to ROE IRF of lnta to ROE IRF of DAR to ROE IRF of ROE to ROE IRF of lnmi to ROE IRF of lnmv to lnmi IRF of EPS to lnmi IRF of lnta to lnmi IRF of DAR to lnmi IRF of ROE to lnmi IRF of lnmi to lnmi Figure 2. Impule repone for PVAR-B(2) model 43

11 Impule-repone for 2 lag VAR of lnmv EPS lnta DAR ROE lnmi IRF of lnmv to lnmv IRF of EPS to lnmv IRF of lnta to lnmv IRF of DAR to lnmv IRF of ROE to lnmv IRF of lnmi to lnmv IRF of lnmv to EPS IRF of EPS to EPS IRF of lnta to EPS IRF of DAR to EPS IRF of ROE to EPS IRF of lnmi to EPS IRF of lnmv to lnta IRF of EPS to lnta IRF of lnta to lnta IRF of DAR to lnta IRF of ROE to lnta IRF of lnmi to lnta IRF of lnmv to DA R IRF of EPS to DAR IRF of lnta to DAR IRF of DAR to DAR IRF of ROE to DAR IRF of lnmi to DAR Error are 5% on each ide generated by Monte-Carlo with 1000 rep IRF of lnmv to ROE IRF of EPS to ROE IRF of lnta to ROE IRF of DAR to ROE IRF of ROE to ROE IRF of lnmi to ROE IRF of lnmv to lnmi IRF of EPS to lnmi IRF of lnta to lnmi IRF of DAR to lnmi IRF of ROE to lnmi IRF of lnmi to lnmi Figure 3. Difference in impule repone for PVAR-A(2) model and PVAR-B(2)(after placard-before placard) from the performance of total aet after placard. However,the market value will not be ignificantly affected by a debt to aet ratio hock in the firt ix period, a hown in Figure 2(IRF of DAR to lnmv), which hare ome reemblance with the performance of debt to aet ratio after placard. A hown in Figure 2(IRF of ROE to lnmv), the market value increae in repone of a profit margin on net aet hock, and the poitive impact lat at leat two period, but diappear ince the third period, which i the ame a the performance of profit margin on net aet after placard. Like the impule repone function of PVAR-A(2) model, the impule effect of the main buine income on the market value of the company hare a great difference from other four variable. A hown in Figure 2(IRF of lnmi to lnmv), the market value only react poitively to a main buine income hock in the econd period. In addition, compared Figure 1 with Figure 2, the market value of the company how a riing trend in the hort term after placard, with the earning per hare riing, the total aet increaing, the debt to aet ratio remaining baically unchanged, the profit margin on net aet temporarily decreaing, and the main buine income remaining table. However, the decline in the profit margin on net aet i not a large a the increae in earning per hare. Therefore, it indicate that the valuation of the company increae after placard, accompanied with profitability trengthened, company ize expanding and company rik remaining table. It eem that barbarian at the gate bring the motivation for the target companie in the hort term. To confirm the change of company performance and valuation after the company i placarded, the paper make the difference between the impule repone for the PVAR-A(2) model and PVAR-B(2)model, a hown in Figure 3. A hown in Figure 3(IRF of EPS to lnmv), the confidence interval i above 0 in the firt period, while the lower bound at 95% confidence break the 0 line, which indicate that the difference between two group i only ignificant in the firt period. Therefore, the ample group how a tronger enitivity of change in the market value of the company after placard than that before placard, which i conitent with the reult of Figure 1 and Figure 2. The lower bound at 95% confidence i above 0 in the firt ix period, which repreent the difference between two ample group i ignificant during firt ix period, a hown in Figure 3(IRF of lnta to lnmv). Therefore, the market value of the company ha an increaed enitivity to a total aet hock after placard, which i in line with the previou analyi of Figure 1 and Figure 2. 44

12 A hown in Figure 3(IRF of DAR to lnmv), although the difference between two ample group how a poitive effect, it can be een from the vertical axi that the difference i very mall. Meanwhile, there i no ignificant difference in the repone of market value to a profit margin on net aet hock, a hown in Figure 3(IRF of ROE to lnmv). In Figure 3(IRF of lnmi to lnmv), the difference between two ample group i ignificant only in the econd and third period, with the lower bound at 95% confidence above 0, indicating that the market value of the company ha an increaed enitivity in repone of a main buine income hock after placard, which i different from what we have concluded before. It come to a concluion that the company i more enitive to the impact of change in it performance a a whole after placard. A hown in Figure 3(IRF of lnmv to lnmv), the market value of company behave enitively in repone of it own hock, but the enitivity oon decline, indicating that the market value ha ome regulating impact on itelf. Therefore, in the long run, the influence brought by placard on the company will be adjuted to a teady tate on the bai of the hort-term impact. 3.4 Variance Decompoition Analyi of Prediction Error By variance decompoition of prediction error, the paper examine how much the change in one variable contribute to the fluctuation of it own or other variable. Since the interaction between the variable i till weak in the hort term, the paper chooe 20 period when analyzing the variance decompoition. Conidering the limitation in pace, the article take the reult of the fourth, eighth, twelfth, ixteenth and twentieth period a example, which are hown in Table 11 and Table 12. Table 11. Variance decompoition reult of PVAR-A(2) model variable lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi A can be een from Table 11, for the market value of company, mot of the variance in it prediction error come from itelf, but the proportion decreae a time pae by, with a more and more lowly peed over the ame time interval. Among the other four variable, the contribution of debt to aet ratio to the variance of the market value how a trend of gradual expanion. 45

13 Table 12. Variance decompoition reult of PVAR-B(2) model variable lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi lnmv EPS lnta DAR ROE lnmi A we can ee from Table 12, for the ample before placard, mot of the variance of the market value in it prediction error alo come from itelf, but the proportion alo decreae gradually over time, with a more and more lowly peed over the ame time interval. Beide, during the ame term, the market value contribute apparently more to it variance of prediction error before placard than that after placard. Among the other four variable, the contribution of total aet to the variance of the market value how a trend of gradual expanion, which i different from the reult of PVAR-A(2) model. Compared Table 11 with Table 12, it eem that the volatility of the market value of company ha le dependence on itelf after placard than before, and it fluctuation come more from other variable. In addition, the performance of earning per hare, total aet, debt to aet ratio, profit margin on net aet and the main buine income hare reemblance with the market value of company, which, to ome extent, indicate that placard reduce the company own reliance on valuation, profitability, ize and rik. In thi way, it i beneficial for the target company to fully coordinate the development, optimize the reource and tructure of the company, o a to enhance the market value and gain more favorable poition in the competition. 4. Concluion Baed on the placard event happened in the Chinee econdary ecuritie market from 2011 to 2015, the paper etablihe an improved PVAR model to carry out a deep analyi on the factor that affect the company performance and valuation, and then obtain comparably accurate reult of placard effect on the target lited companie. Firt, the change in performance and valuation of the company are different after placard, compared with that before placard. For the target companie, the impact of the lag valuation on the current value ha changed after placard, with the poitive impact of the firt-order lag value and negative impact of the econd-order lag value before placard changing into the poitive influence of thee two lag period after placard. However, the poitive impact of the firt-order lag after placard i maller than that before placard, which indicate that placard ha weakened the target company reliance on it previou market value. Simultaneouly, the valuation of the target company i cloely related to the 46

14 company ize and rik after placard, while the valuation i only cloely aociated with the company ize before placard. In addition, the change in company ize after placard i lagging behind, and the enitivity of company profitability, ize and rik to placard i not a good a the company valuation. Second, there are ome change exiting in the enitivity to impule and the value of variable after placard. The reult of impule repone function indicate that the valuation of the company increae after placard, accompanied with profitability trengthened, company ize expanding and company rik remaining table. It eem that barbarian at the gate bring the motivation for the target companie in the hort term. In addition, the company i more enitive to the impact of change in it performance a a whole after placard. Meanwhile, the market value of company behave enitively in repone of it own hock after placard, but the enitivity oon decline, indicating that the market value ha ome regulating impact on itelf. Therefore, in the long run, the influence brought by placard on the company will be adjuted to a teady tate on the bai of the hort-term impact. Third, the interrelationhip among financial variable are cloer becaue of the placard impule than before, and a relatively table tate can be reached after a long period of time, which i more table than that before placard. Therefore, placard reduce the company own reliance on valuation, profitability, ize and rik. In thi way, it i beneficial for the target company to fully coordinate the development. Placard i a good ignal for thoe target enterprie on the whole, which bring a nice momentum for the enterprie on the valuation, profitability, ize and rik in the hort term. After placard, the financial variable of the company are more enitive to the hock, and meanwhile the dependence on other variable i increaed, which ait the company to retore the original balance by controlling other variable in the face of the hock. However, the company cannot paively face the hock ariing from placard and let it develop freely. Intead, the company hould adopt a poitive trategy to maintain the long-term management, with the purpoe of paing a good ignal of the company growth to the market and pecifying the direction of future corporate governance and development. A for the major hareholder and ordinary invetor, the target tock alo convey a good and valuable ignal on the whole. From thi point of view, barbarian at the gate bring the motivation rather than chao. Reference Berdiev, A. N., & Saunori, J. W. (2016). Financial development and the hadow economy: A panel VAR analyi. Economic Modelling, 57, Chen, Y. (2016). A cae tudy on economic conequence of the lited companie which have been placarded on the bai of different motivation. Shenyang Univerity of Technology. Gugler, M., & Yurtoglu. (2003). The effect of merger: an international comparion. International Journal of Indutrial Organization, 21(5), He, J., & Xu, L. (2012). The path and influence of indutrial capital infiltrating into financial capital: a tudy baed on the placard event of capital market. Financial Reearch, (02), Kumar, M. S. (1985). Growth, Acquiition Activity and Firm Size: Evidence from the United Kingdom. Journal of Indutrial Economic, 33(3), Lei, H., Shao, H., & Li, A. (2010).The effect of M&A of low-carbon lited companie on the labor demand: baed on the empirical analyi of dynamic panel data. Sytem Engineering, (12), Love, I., & Zicchino, L. (2006). Financial development and dynamic invetment behavior: Evidence from panel VAR. Quarterly Review of Economic & Finance, 46(2), Luo, C. (2016). R&D intenity, payment gap and company performance: a imultaneou equation model baed on panel data. Accounting Monthly, (08), Lv, P. (2014). Reearch on market reaction and it influencing factor of placard carried out by the hareholder in lited companie. Nanjing Univerity. Pang, J. (2014). An empirical tudy on the hareholding-change behavior of large hareholder and corporate performance. Southwetern Univerity of Finance and Economic. Rao, N. R., Salaber, J., & Cao, T. H. (2016). Long-term performance of merger and acquiition in ASEAN countrie. Reearch in International Buine & Finance, 36, Sun, X. (2011). An empirical tudy on hort-term influence of large hareholder tock-increae behavior on tock price in China. Dongbei Univerity of Finance and Economic. Wu, J. (2012). M&A performance analyi of Chinee lited pharmaceutical companie baed on the panel data. Inner Mongolia Univerity. 47