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Does policy uncertainty influence mergers and acquisitions activities in China? A replication study

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  • Borthwick, James
  • Ali, Searat
  • Pan, Xiaofei

Abstract

In this paper, we replicate the results of Bonaime, Gulen and Ion (Journal of Financial Economics, 2018, p531–558) who investigate the influence of policy uncertainty on mergers and acquisitions (M&As) amongst US firms for the period 1985 to 2014. Utilising a similar dataset and methodology, we present confirmatory evidence suggesting a negative influence of policy uncertainty on M&As in the US context. We repeat the analysis on a sample of Chinese firms from 2003 to 2017 and also find that subsequent year M&A likelihood is decreasing in policy uncertainty amongst Chinese firms. Overall, our replication exercise confirms the negative effect of policy uncertainty on subsequent M&As in both countries, regardless of institutional differences. Further, the economic significance of the association is found to be lower for both the US and Chinese samples in comparison to the original study.

Suggested Citation

  • Borthwick, James & Ali, Searat & Pan, Xiaofei, 2020. "Does policy uncertainty influence mergers and acquisitions activities in China? A replication study," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:pacfin:v:62:y:2020:i:c:s0927538x20300135
    DOI: 10.1016/j.pacfin.2020.101381
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    References listed on IDEAS

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    1. Huang, Yun & Luk, Paul, 2020. "Measuring economic policy uncertainty in China," China Economic Review, Elsevier, vol. 59(C).
    2. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 227-243.
    3. Cull, Robert & Li, Wei & Sun, Bo & Xu, Lixin Colin, 2015. "Government connections and financial constraints: Evidence from a large representative sample of Chinese firms," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 271-294.
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    5. Bonaime, Alice & Gulen, Huseyin & Ion, Mihai, 2018. "Does policy uncertainty affect mergers and acquisitions?," Journal of Financial Economics, Elsevier, vol. 129(3), pages 531-558.
    6. Shao, Yingying & Hernández, Rodrigo & Liu, Pu, 2015. "Government intervention and corporate policies: Evidence from China," Journal of Business Research, Elsevier, vol. 68(6), pages 1205-1215.
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    1. Dang, Man & Henry, Darren & Thai, Hong An & Vo, Xuan Vinh & Mazur, Mieszko, 2022. "Does policy uncertainty predict the death of M&A deals?," Finance Research Letters, Elsevier, vol. 46(PB).
    2. Shen, Huayu & Liang, Yue & Li, Hanwen & Liu, Jie & Lu, Guangxi, 2021. "Does geopolitical risk promote mergers and acquisitions of listed companies in energy and electric power industries," Energy Economics, Elsevier, vol. 95(C).
    3. Karolis Andriuškevičius & Dalia Štreimikienė, 2022. "Energy M&A Market in the Baltic States Analyzed through the Lens of Sustainable Development," Energies, MDPI, vol. 15(21), pages 1-21, October.
    4. Shen, Xieyang & Yang, Sijie & Chen, Yulin & Zeng, Jianyu, 2022. "How does economic policy uncertainty influence managers' learning from peers' stock prices? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 74(C).
    5. Zhang, Weike & Zhang, Xueyuan & Tian, Xiaoli & Sun, Fengwei, 2021. "Economic policy uncertainty nexus with corporate risk-taking: The role of state ownership and corruption expenditure," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Mergers and acquisitions; Policy uncertainty; United States; China; Replication;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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