Cross-border acquisitions by Chinese enterprises: The benefits and disadvantages of political connections

Schweizer, Denis; Walker, Thomas; Zhang, Aoran

Abstract

This paper explores whether and how political connections affect the likelihood of completing a cross-border M&A deal for Chinese publicly listed, but privately-owned enterprises (POEs) and the resulting firm performance. In line with our proposed political connection trade-off theory, we find that POEs with politically connected top managers are more likely to complete a cross-border M&A deal than POEs with no such connections, but that this comes at the cost of negative announcement returns and subsequent lower accounting performance. These findings support the idea that politically connected top managers engage in "political empire building" behavior at the cost of shareholders' wealth.

Citation

Schweizer, D., Walker, T., & Zhang, A. (2019). Cross-border acquisitions by Chinese enterprises: The benefits and disadvantages of political connections. Journal of Corporate Finance, 57, 63-85. https://doi.org/10.1016/j.jcorpfin.2017.12.023

• Journal Article Type: Article
• Acceptance Date: Dec 14, 2017
• Online Publication Date: Dec 16, 2017
• Publication Date: 2019-08
• Deposit Date: Jun 2, 2020
• Publicly Available Date: Jun 3, 2020
• Journal: Journal of Corporate Finance
• Print ISSN: 0929-1199
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 57
• Pages: 63-85
• DOI: https://doi.org/10.1016/j.jcorpfin.2017.12.023
• Keywords: China; Cross-border M&As; Emerging Markets; Multinational Enterprises; Political Connections JEL Classification: G15; G18; G34
• Public URL: https://nottingham-repository.worktribe.com/output/4564016
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0929119917301335?via%3Dihub