Volume 7, Issue 5, October 2018, Page: 158-169
The Political Considerations in Chinese Companies’ Cross-Border Acquisitions
Shi Li, Xiamen National Accounting Institute, Xiamen, China
Received: Aug. 13, 2018;       Accepted: Sep. 12, 2018;       Published: Oct. 13, 2018
DOI: 10.11648/j.ijber.20180705.15      View  265      Downloads  33
Abstract
Cross-border acquisition activity led by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Using a sample of 543 cross-border transactions made by China’s listed companies from 2000 to 2014, this paper examines whether the acquisition of foreign political sensitive assets, which may threat foreign countries’ national security, affect the likelihood of acquisition completion and acquisition performance. We find that central government-owned enterprises are more likely to acquire political sensitive assets than private-owned enterprises and local government-owned enterprises. The political sensitive acquisitions are less likely to be completed than others. The market response of acquisition announcements is significantly greater for political sensitive acquisitions than for other acquisitions, which suggests that political sensitive acquisitions increase shareholders’ wealth. Finally, we show that the positive effect of political sensitive acquisitions on shareholders’ wealth is stronger for private-owned enterprises than for state-owned enterprises. Overall, our findings suggest that Chinese companies should reduce the political risks of cross-border acquisitions and try to achieve a win-win for the nation, market and enterprises when they implement “go-out” strategy. In academic value, this paper offers a new research angle on cross-border acquisitions, which is the impact of political sensitive target on acquisition transactions.
Keywords
Cross-border Merger, Acquisitions, Political Sensitive Assets, Acquisition Performance
To cite this article
Shi Li, The Political Considerations in Chinese Companies’ Cross-Border Acquisitions, International Journal of Business and Economics Research. Vol. 7, No. 5, 2018, pp. 158-169. doi: 10.11648/j.ijber.20180705.15
Copyright
Copyright © 2018 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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