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Chinese Overseas M&A Performance and the Go Global Policy

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Abstract

It 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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  • 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.
  • Handle: RePEc:cbt:econwp:12/07
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    File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1207.pdf
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    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
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    6. Pehr-Johan Norbäck & Lars Persson, 2008. "Cross-Border Mergers & Acquisitions Policy in Service Markets," Journal of Industry, Competition and Trade, Springer, vol. 8(3), pages 269-293, December.
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    8. Agata Antkiewicz & John Whalley, 2007. "Recent Chinese Buyout Activity and the Implications for Wider Global Investment Rules," Canadian Public Policy, University of Toronto Press, vol. 33(2), pages 207-226, June.
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    Cited by:

    1. Nan Hu & Yun (Ivy) Zhang & Songtao Tan, 2016. "Determinants of Chinese Cross-Border M&As," Annals of Economics and Finance, Society for AEF, vol. 17(1), pages 209-233, May.
    2. Cozza, C. & Rabellotti, R. & Sanfilippo, M., 2015. "The impact of outward FDI on the performance of Chinese firms," China Economic Review, Elsevier, vol. 36(C), pages 42-57.
    3. Gambhir, Ajay & Schulz, Niels & Napp, Tamaryn & Tong, Danlu & Munuera, Luis & Faist, Mark & Riahi, Keywan, 2013. "A hybrid modelling approach to develop scenarios for China's carbon dioxide emissions to 2050," Energy Policy, Elsevier, vol. 59(C), pages 614-632.

    More about this item

    Keywords

    Overseas Mergers and Acquisitions; Event study; Go Global;

    JEL classification:

    • 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, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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