Chinese Overseas M&A Performance and the Go Global Policy
AbstractIt is well-known that government plays an important role in the business activities of Chinese firms. Less certain is the effect this influence has on the wealth of those firms’ shareholders. We contribute to the literature by analyzing stock market reactions to announcements by Chinese firms of overseas mergers and acquisitions (OMAs). OMAs are of particular interest because there can exist a conflict between the interests of the public sector in acquiring overseas assets, and the interests of the private sector in maximizing shareholder wealth. Our main data set consists of 213 observations of 157 OMA events that occurred between 1994-2009, using share market returns from the Shanghai, Shenzhen, Hong Kong, and U.S. markets. The aggregation of share price data across multiple markets, and the listing of firms in multiple exchanges, raise econometric issues for the standard event-study methodology. To address these, we use a new, feasible generalized least squares (GLS) procedure developed by Gu (2011). Based upon an analysis using both aggregated and disaggregated samples, and of daily and cumulative abnormal returns, we find consistent evidence that (i) Chinese OMAs have not lowered the wealth of shareholders of Chinese acquiring firms, and (ii) shareholders of Chinese acquiring firms have not fared worse under Go Global than before Go Global.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 11/37.
Length: 41 pages
Date of creation: 09 Apr 2011
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Overseas Mergers and Acquisitions; Event study; Go Global;
Other versions of this item:
- Lulu Gu & W.R. Reed, 2013. "Chinese overseas M&A performance and the Go Global policy," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(1), pages 157-192, 01.
- Lulu Gu & W. Robert Reed, 2010. "Chinese Overseas M&A Performance and the go Global Policy," Working Papers in Economics 10/25, University of Canterbury, Department of Economics and Finance.
- Lulu Gu & W. Robert Reed, 2012. "Chinese Overseas M&A Performance and the Go Global Policy," Working Papers in Economics 12/07, University of Canterbury, Department of Economics and Finance.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- O25 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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