Using the data of Chinese cross‐border mergers and acquisitions (M&As) from 2003 to 2017, we investigate the influence of the internal financial conditions of enterprises on the short‐term market performance of Chinese cross‐border M&As by applying improved DuPont financial analysis, an event study and regression analysis and further explore the moderating effect of payment method in Chinese cross‐border M&A. The findings are threefold. First, we observe significant positive cumulative abnormal returns (CARs) of Chinese cross‐border M&As, along with the underperformance of cross‐border M&As financed with pure cash payments compared to those financed with other payment methods. Second, the profitability and financial leverage of Chinese enterprises engaged in cross‐border M&As are significantly positively and significantly negatively correlated with CARs, respectively, while the impact of the operating capacity on CARs is limited. Finally, we note that the negative influence of financial leverage on CARs is enhanced in pure cash bids, which indicates that the payment method plays a prominent moderating role in the impact of financial leverage on the short‐term market performance of Chinese cross‐border M&As. Our result suggests that one reason for the underperformance of cross‐border M&As financed with pure cash payment compared to M&As financed with other payment methods is the negative effect of financial leverage, which is augmented in cross‐border M&As financed with pure cash payment.

Based on the data of cross-border M&As from 2005 to 2016, the effect of LBO financing on the performance of crossborder M&A of metallurgical enterprises in China was investigated by using DID and PSM-DID estimation. Results show that LBO financing improves the market performance of Chinese metallurgical enterprises, but has no significant effect on the sustainable development ability, profitability and market share, and can significantly reduce the operational efficiency, which implies that after LBO financing, there is deviation between market performance and financial performance of Chinese metallurgical enterprises; State-owned metallurgical enterprises are more inclined to choose LBO financing, indicating that state-owned metallurgical enterprises have more external financing advantages.