Abstract: This paper uses the 2009-2015 China A-share listed company merger and acquisition (M&A) events as research samples to explore the motivations of mergers and acquisitions under financial constraints. In addition to Agency Theory and Caution Investment Hypothesis of the existing researches, this paper proposes a Signal Transmission Hypothesis to test the impact of financial constraints on the consequences of M&A. We find that the higher degree of financing constraints faced by an acquirer, the better short-term M&A performance and the worse long-term M&A performance it will have, indicating that the M&A events under financing constraints can be better explained by the Signal Transmission Theory. Further research finds that the above effects are more pronounced in non-state-owned enterprises and cash-payment M&A events; the signal will have a positive effect for about 14 months and then the positive effect will gradually weaken until it becomes negative after the 29th month. This study believes that it is necessary to deepen the reform of the financial system and release private enterprises from information asymmetry and extra cost. Only by solving the financing constraints of enterprises can they be provided good conditions for long-term development.

Key words: financial constraints, M&A, agency theory, cautious investment, signal transmission