Does State Ownership Drive M&A Performance? Evidence from China

Abstract

This paper examines the role of state ownership in mergers and acquisitions by analysing the short‐ and long‐term performance of Chinese state‐owned enterprise (SOE) acquirers relative to privately owned enterprise (POE) peers from 1994 to 2008. The empirical results show that SOE acquirers outperform POE acquirers in terms of long‐run stock performance and operating performance. In addition, consistent with previous literature, our results suggest that the gains from government intervention outweigh the inefficiency of state ownership in Chinese mergers and acquisitions.

Corporate ownership and market valuation in South Africa: uncovering the effects of shareholdings by different groups of corporate insiders and outsiders

“…Previous studies examining the association between director shareholdings and firm valuation have relied primarily on agency theory in interpreting their empirical results (Mork et al, 1988;Bouzgarrou and Navatte, 2013;Knyazeva et al, 2013;Zhou et al, 2013). In this section, we 2 See Larcker and Rusticus (2010) for a comprehensive discussion of the different types of endogeneity problems that are prevalent within the positive empirical accounting literature, as well as ways by which they could be addressed.…”

“…First, most of the past studies examining the link between corporate officers (insiders and outsiders) ownership and firm valuation have assumed that all corporate officers (insiders and outsiders) have common objectives for holding shares, and as such, have often attempted to connect shareholdings of all corporate officers (insiders and outsiders) to market valuation (Morck et al, 1988;McConnell and Servaes, 1990;Welch, 2003;Berger and Bouwman, 2013). However, and to the extent that corporate officers (insiders and outsiders), such as employees, executive directors, and outside directors or NEDs often have conflicting interests, as previously clarified (Agrawal and Knoeber, 1996;Beiner et al, 2006;Connelly et al, 2012;Zhou et al, 2013), it is reasonable to conjecture that the impact of shareholdings by different groups of corporate officers (insiders and outsiders) on market valuation might differ. Thus, investigating the impact of shareholdings of all corporate officers (insiders and outsiders) instead of shareholdings by individual groups of corporate insiders and outsiders on market valuation may result in misleading findings.…”

“…For example, and using a sample of US listed corporations, Morck et al (1988) report a non-linear association between common stocks held by all directors and corporate performance. However, and given that the objectives of corporate officers (insiders and outsiders), such as employees, chief executive officers (CEOs), chief financial officers (CFOs), and outside directors or non-executive directors (NEDs) are mostly conflicting (Agrawal and Knoeber, 1996;Beiner et al, 2006;Knyazeva et al, 2013;Zhou et al, 2013) 1 , our conjecture is that the effect of ownership by different groups of corporate officers (insiders and outsiders) on firm valuation may differ. Therefore, and distinct from most previous studies, we examine the effect that shareholdings 1 As will be expatiated further in section 2, we note that the separation of ownership (shareholding) from control (management) in modern corporations creates two main agency conflicts (Jensen and Meckling, 1976).…”

“…With specific reference to incentives and shareholdings by corporate officers (insiders and outsiders), the King Reports seek to encourage corporate officers in particular to hold shares of companies that they run in order to closely align their interests with those of shareholders (King Committee, 1994, 2002. More specifically, the King Reports suggest that the performance-related elements of the compensation packages of corporate officers (especially directors), such as vested shares and options should form a large part of the total compensation (King Committee, 2002;West, 2006West, , 2009 (Morck et al, 1988;McConnell and Servaes, 1990;Davies et al, 2005;Bouzgarrou and Navatte, 2013;Knyazeva et al, 2013;Zhou et al, 2013). Our contribution lies in using a much richer dataset that allows us to further analyse the valuation implications of shareholdings of a larger group of different corporate officers (insiders and outsiders).…”

Theoretical Research and Prospect of the Impact of Government Intervention on M a A

“…Therefore, the government should strictly control or even split the mergers and acquisitions, to reduce the possible market failure brought about by M & A. The empirical results show that SOE acquirers outperform POE acquirers in terms of long-run stock performance and operating performance [9].…”