Cross-Border Mergers and Acquisitions by Chinese Firms : value creation or value destruction?

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalNot applicablepeer-review

4 Scopus Citations
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Original languageEnglish
Pages (from-to)130-145
Journal / PublicationJournal of Contemporary China
Volume25
Issue number97
Online published26 Oct 2015
Publication statusPublished - Jan 2016

Abstract

Mixed results from studies on Chinese cross-border mergers and acquisitions (M&As) have been a puzzle for both academia and business professionals over the years. Do these M&As create value when Chinese firms acquire foreign target firms suffering heavy losses and even on the verge of bankruptcy? This article explores the wealth effect of M&As conducted by Chinese firms as well as the relevant factors from the asset-seeking perspective. The authors use 180 M&A cases conducted by listed firms in China between 2002 and 2012 as samples and examine their wealth effects in a method of event study. The results show that these M&A activities have produced significant positive wealth effects during the event window of [-10, 10]. The authors then study the key factors affecting wealth effects. The findings reveal that an acquiring firm's strength via research and development (R&D) and M&A experience generates significant positive impacts on the wealth effect. The findings also reveal that an innovation orientation and development stage of host countries helps create positive wealth effects; vertical M&As are particularly favored by the market since they can gain easier access to R&D, marketing channels or mineral resources.