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The impact of state ownership, formal institutions and resource seeking on acquirers’ returns of Chinese M&A

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Abstract

We examine the effects of state ownership, institutions and resource-seeking behavior on post-acquisition stock price returns of Chinese cross-border mergers and acquisitions over the period 1998–2008. Chinese acquiring firms experience negative returns ranging from 2.92 to 10.80 % in 12- and 60-month post-event periods, respectively. State ownership (SOE), interaction between R&D and SOE, formal institutional distance and acquirer size have a positive and significant impact on the long-term acquirer returns. However, the interaction between tangible resources and SOE and acquirer cash holdings appears to have a negative and significant impact on long-term returns. Overall, our results suggest that the state and institutions constitute important sources of long-term value creation for Chinese acquirers.

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Notes

  1. The priority sector (resource seeking) in this study includes minerals, petroleum, research and development (R&D) (Deng 2004; Cai 1999; Wu and Sia 2002).

  2. Hair et al. (2010) note that a correlation of 0.60 fairly represents a strong relationship, but a correlation of 0.70 between two predictor variables means a substantial portion of this predictive power may be shared.

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Acknowledgments

The authors would like to thank the anonymous reviewer, Prof. Cheng-Few Lee (The Journal’s Editor); Prof. Daniel Bello, Area Editor JIBS, Conference participants of Academy of International Business-SE 2013, Atlanta where the paper was a finalist for the Best Paper Award and the participants of the British Academy of Management Conference in Belfast 2014 for valuable comments and suggestions.

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Authors and Affiliations

  1. Leeds Business School, Leeds Beckett University, Leeds, UK

    Min Du

  2. Glasgow School of Business & Society (GSBS), Glasgow Caledonian University, Cowcaddens, Glasgow, G4 0BA, UK

    Agyenim Boateng

  3. NUBS, University of Nottingham, Nottingham, UK

    David Newton

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  1. Min Du
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Correspondence to Agyenim Boateng.

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Du, M., Boateng, A. & Newton, D. The impact of state ownership, formal institutions and resource seeking on acquirers’ returns of Chinese M&A. Rev Quant Finan Acc 47, 159–178 (2016). https://doi.org/10.1007/s11156-015-0498-0

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