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Acquiring Capacity and Acquiring Behavior of Chinese Firms

Author

Listed:
  • Jianguo Chen

    (Massey University)

  • Jing Chi

    (Massey University)

  • Shu Zhu

Abstract

China's short stock market history has already seen three merger waves, yet little is known of the performance drivers of acquirers. Using an acquirer's announced target value as the proxy of the firm's acquiring capacity, the link between that and its operational and/or financial conditions was investigated. Cash reserve ratio was significant in determining capacity: a firm with a higher cash ratio will, on average, take a larger target firm in both absolute value and relative measure. A larger acquirer size is associated with a larger takeover size, but a lesser target ratio is relative to the size of the acquirer. Firms' debt and profitability ratios do not explain the target size.

Suggested Citation

  • Jianguo Chen & Jing Chi & Shu Zhu, 2009. "Acquiring Capacity and Acquiring Behavior of Chinese Firms," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 12(4), pages 87-104, Spring.
  • Handle: RePEc:pep:journl:v:12:y:2009:i:4:p:87-104
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    More about this item

    Keywords

    Firm ; Firms ; Merger ; Takeover;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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