Trust Mechanism and M&A Performance: Trust Mechanism in Chinese SOEs’ Mixed Ownership-Oriented M&A

This chapter looks into M&A events and examines the influence of informal institutional social trust in the region where listed companies are located on the value creation ability of M&A transaction entities from the perspective of transaction costs. Empirical research shows that the higher the social trust in the place where the acquirer is located, the more parties to M&A reduce opportunism and free-riding through trust, supervise each other’s honest and trustworthy cooperative behavior, reduce uncertainty, and ultimately make M&A possible and improve capabilities for value creation through M&A. This effect is more significant in private enterprises and areas with lower levels of regional laws. In terms of the impact on M&A performance, there is an alternative relationship between legal system and social trust. Further research reveals that the degree of regional social trust will reduce the behavior of leading companies in selecting market intermediaries and reduce transaction costs. This book reveals the feasibility and importance of informal systems in helping master acquirers reduce information asymmetry and transaction costs through regional trust, and create value after M&A. Its conclusions not only provide a new way perspective on understanding M&A in China’s capital market during economic transition, but also enriches research on informal institutions.