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How do political connections cause SOEs and non‐SOEs to make different M&A decisions/performance? Evidence from China

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  • Qigui Liu
  • Tianpei Luo
  • Gary Gang Tian

Abstract

This study examines the impact that political connections have on Mergers and Acquisitions (M&A) performance and the decisions of Chinese listed firms. We find that political connections destroy (create) value in SOEs (non‐SOEs). Our findings show that connected SOEs are more likely to acquire local targets, especially when the local unemployment rate is high and when the firms are controlled by the local government, and they are less likely to conduct vertical mergers. M&A decisions of connected non‐SOEs are less influenced by the government; instead, political connections in non‐SOEs help bidders to integrate vertically and obtain external financing support.

Suggested Citation

  • Qigui Liu & Tianpei Luo & Gary Gang Tian, 2019. "How do political connections cause SOEs and non‐SOEs to make different M&A decisions/performance? Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(4), pages 2579-2619, December.
    • Handle: RePEc:bla:acctfi:v:59:y:2019:i:4:p:2579-2619
    DOI: 10.1111/acfi.12302
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