IDEAS home Printed from https://ideas.repec.org/a/bla/worlde/v45y2022i5p1614-1647.html
   My bibliography  Save this article

Cross‐border M&As and the performance of Chinese acquiring firms

Author

Listed:
  • Wenli Sun
  • Dan Xie

Abstract

This paper investigates the performance of Chinese acquirers in cross‐border mergers and acquisitions (M&As) between 2010 and 2018. Compared to domestic acquirers, the paper finds no significant improvement in labour productivity nor total factor productivity (TFP) within two years after acquisitions. However, firms engaged in foreign acquisitions witness an increase in total sales, employ more labour and accumulate more capital up to two years after transactions. The effects are more pronounced in deals in developed destinations relative to less‐developed countries. Heterogeneous effects are explored across various industries, as well as deal structures. The results imply that outward cross‐border M&As in China are not driven by productivity improvement but rather scale effects.

Suggested Citation

  • Wenli Sun & Dan Xie, 2022. "Cross‐border M&As and the performance of Chinese acquiring firms," The World Economy, Wiley Blackwell, vol. 45(5), pages 1614-1647, May.
    • Handle: RePEc:bla:worlde:v:45:y:2022:i:5:p:1614-1647
    DOI: 10.1111/twec.13200
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/twec.13200
    Download Restriction: no
    File URL: https://libkey.io/10.1111/twec.13200?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2016. "Prices, Markups, and Trade Reform," Econometrica, Econometric Society, vol. 84, pages 445-510, March.
    2. Fons-Rosen, Christian & Kalemli-Ozcan, Sebnem & Sørensen, Bent E. & Villegas-Sanchez, Carolina & Volosovych, Vadym, 2021. "Quantifying productivity gains from foreign investment," Journal of International Economics, Elsevier, vol. 131(C).
    3. Bertrand, Olivier & Betschinger, Marie-Ann, 2012. "Performance of domestic and cross-border acquisitions: Empirical evidence from Russian acquirers," Journal of Comparative Economics, Elsevier, vol. 40(3), pages 413-437.
    4. Bruce A. Blonigen & Lionel Fontagné & Nicholas Sly & Farid Toubal, 2019. "Cherries for Sale: The Incidence and Timing of Cross-border M&A," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 4, pages 121-177, World Scientific Publishing Co. Pte. Ltd..
    5. Stiebale, Joel & Vencappa, Dev, 2018. "Acquisitions, markups, efficiency, and product quality: Evidence from India," Journal of International Economics, Elsevier, vol. 112(C), pages 70-87.
    6. Maria Guadalupe & Olga Kuzmina & Catherine Thomas, 2012. "Innovation and Foreign Ownership," American Economic Review, American Economic Association, vol. 102(7), pages 3594-3627, December.
    7. Jože Damijan & Črt Kostevc & Matija Rojec, 2015. "Growing Lemons or Cherries? Pre and Post-acquisition Performance of Foreign-Acquired Firms in New EU Member States," The World Economy, Wiley Blackwell, vol. 38(4), pages 751-772, April.
    8. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    10. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    11. Alberto Abadie & Guido W. Imbens, 2008. "On the Failure of the Bootstrap for Matching Estimators," Econometrica, Econometric Society, vol. 76(6), pages 1537-1557, November.
    12. Bruce A. Blonigen & Lionel Fontagné & Nicholas Sly & Farid Toubal, 2019. "Cherries for Sale: The Incidence and Timing of Cross-border M&A," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 4, pages 121-177, World Scientific Publishing Co. Pte. Ltd..
    13. Wang, Jian & Wang, Xiao, 2015. "Benefits of foreign ownership: Evidence from foreign direct investment in China," Journal of International Economics, Elsevier, vol. 97(2), pages 325-338.
    14. Schiffbauer, Marc & Siedschlag, Iulia & Ruane, Frances, 2017. "Do foreign mergers and acquisitions boost firm productivity?," International Business Review, Elsevier, vol. 26(6), pages 1124-1140.
    15. Xavier Vives, 2008. "Innovation And Competitive Pressure," Journal of Industrial Economics, Wiley Blackwell, vol. 56(3), pages 419-469, December.
    16. Kalina Manova & Shang-Jin Wei & Zhiwei Zhang, 2015. "Firm Exports and Multinational Activity Under Credit Constraints," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 574-588, July.
    17. Laurent Fresard, 2010. "Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings," Journal of Finance, American Finance Association, vol. 65(3), pages 1097-1122, June.
    18. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    19. Li, Jiatao & Li, Peixin & Wang, Baolian, 2016. "Do cross-border acquisitions create value? Evidence from overseas acquisitions by Chinese firms," International Business Review, Elsevier, vol. 25(2), pages 471-483.
    20. Andrea Gamba & Alexander Triantis, 2008. "The Value of Financial Flexibility," Journal of Finance, American Finance Association, vol. 63(5), pages 2263-2296, October.
    21. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    22. Cho, Hyejin & Ahn, He Soung, 2017. "Stock payment and the effects of institutional and cultural differences: A study of shareholder value creation in cross-border M&As," International Business Review, Elsevier, vol. 26(3), pages 461-475.
    23. Kohli, Reena & Mann, Bikram Jit Singh, 2012. "Analyzing determinants of value creation in domestic and cross border acquisitions in India," International Business Review, Elsevier, vol. 21(6), pages 998-1016.
    24. Laurent Fresard, 2010. "Financial Strength and Product Market Behavior: The Real Effects of Corporate Cash Holdings," Post-Print hal-00537081, HAL.
    25. Yang, Junhong & Guariglia, Alessandra & Guo, Jie (Michael), 2019. "To what extent does corporate liquidity affect M&A decisions, method of payment and performance? Evidence from China," Journal of Corporate Finance, Elsevier, vol. 54(C), pages 128-152.
    26. Sathyajit R Gubbi & Preet S Aulakh & Sougata Ray & M B Sarkar & Raveendra Chittoor, 2010. "Do international acquisitions by emerging-economy firms create shareholder value? The case of Indian firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(3), pages 397-418, April.
    27. Nocke, Volker & Yeaple, Stephen, 2007. "Cross-border mergers and acquisitions vs. greenfield foreign direct investment: The role of firm heterogeneity," Journal of International Economics, Elsevier, vol. 72(2), pages 336-365, July.
    28. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, January.
    29. Shleifer, Andrei & Vishny, Robert W, 1988. "Value Maximization and the Acquisition Process," Journal of Economic Perspectives, American Economic Association, vol. 2(1), pages 7-20, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stiebale, Joel & Vencappa, Dev, 2018. "Acquisitions, markups, efficiency, and product quality: Evidence from India," Journal of International Economics, Elsevier, vol. 112(C), pages 70-87.
    2. Wang, Jian & Wang, Xiao, 2015. "Benefits of foreign ownership: Evidence from foreign direct investment in China," Journal of International Economics, Elsevier, vol. 97(2), pages 325-338.
    3. Fons-Rosen, Christian & Kalemli-Ozcan, Sebnem & Sørensen, Bent E. & Villegas-Sanchez, Carolina & Volosovych, Vadym, 2021. "Quantifying productivity gains from foreign investment," Journal of International Economics, Elsevier, vol. 131(C).
    4. Stiebale, Joel, 2016. "Cross-border M&As and innovative activity of acquiring and target firms," Journal of International Economics, Elsevier, vol. 99(C), pages 1-15.
    5. Stiebale, Joel & Vencappa, Dev, 2022. "Import competition and vertical integration: Evidence from India," Journal of Development Economics, Elsevier, vol. 155(C).
    6. Schiffbauer, Marc & Siedschlag, Iulia & Ruane, Frances, 2017. "Do foreign mergers and acquisitions boost firm productivity?," International Business Review, Elsevier, vol. 26(6), pages 1124-1140.
    7. García-Vega, María & Gupta, Apoorva & Kneller, Richard, 2023. "Is acquisition-FDI during an economic crisis detrimental for domestic innovation?," DICE Discussion Papers 403, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Ali, Nesma & Stiebale, Joel, 2021. "Foreign direct investment, prices and efficiency: Evidence from India," DICE Discussion Papers 363, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Bricongne, Jean-Charles & Delpeuch, Samuel & Lopez-Forero, Margarita, 2023. "Productivity slowdown and tax havens: Where is measured value creation?," Journal of International Economics, Elsevier, vol. 143(C).
    10. Jean-Charles Bricongne & Samuel Delpeuch & Margarita Lopez Forero, 2021. "Productivity Slowdown, Tax Havens and MNEs’ Intangibles: where is measured value creation?," Documents de recherche 21-01, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    11. Jean-Charles Bricongne & Samuel Delpeuch & Margarita Lopez Forero, 2021. "Regional Productivity Slowdown, Tax Havens and MNEs’ Intangibles: where is Measured Value Creation?," Working papers 835, Banque de France.
    12. Todtenhaupt, Maximilian & Voget, Johannes, 2021. "International taxation and productivity effects of M&As," Journal of International Economics, Elsevier, vol. 131(C).
    13. Todtenhaupt, Maximilian & Voget, Johannes, 2018. "International Taxation and Productivity Effects of M&As," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181548, Verein für Socialpolitik / German Economic Association.
    14. Singh, Rahul & Chanda, Rupa, 2021. "Technical regulations, intermediate inputs, and performance of firms: Evidence from India," Journal of International Economics, Elsevier, vol. 128(C).
    15. Zhou, Tianhang & Li, Xue & Yan, Guo & Li, Jie, 2022. "How productivity and credit constraints affect exports differently? Firm-level evidence from China," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 207-230.
    16. Li, Xue & Anwar, Sajid & Peng, Fei, 2022. "Cross-border acquisitions and the performance of Chinese publicly listed companies," Journal of Business Research, Elsevier, vol. 141(C), pages 575-588.
    17. Baccini, Leonardo & Impullitti, Giammario & Malesky, Edmund J., 2019. "Globalization and state capitalism: Assessing Vietnam's accession to the WTO," Journal of International Economics, Elsevier, vol. 119(C), pages 75-92.
    18. Alviarez, Vanessa, 2019. "Multinational production and comparative advantage," Journal of International Economics, Elsevier, vol. 119(C), pages 1-54.
    19. Stefano Schiavo & Lionel Nesta, 2017. "International Competition and Rent Sharing in French Manufacturing," DEM Working Papers 2017/07, Department of Economics and Management.
    20. repec:hal:spmain:info:hdl:2441/j27962rn8r5qgvg0f7t0vk5q is not listed on IDEAS
    21. Caselli, Mauro & Schiavo, Stefano & Nesta, Lionel, 2018. "Markups and markdowns," Economics Letters, Elsevier, vol. 173(C), pages 104-107.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:worlde:v:45:y:2022:i:5:p:1614-1647. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.