Grabbing hand or helping hand? Ownership interventions and acquirers returns; the role of provincial idiosyncrasies

Abstract

Firm's performance is not only influenced by sound decisions but also by institutional processes. This study argues that the effect of government intervention on acquisition returns is partly dependent on institutional factors such as provincial marketization and the legal environment. This study employs ownership and merger and acquisition regulations issued by the Chinese government 2003–2018 to measure government intervention and also employs both the OLS and the random effects technique. The result shows a positive relationship between ownership intervention and acquisition returns. Next, the study finds that variances in regional marketization and the legal environment strengthen this relationship such that acquirers in high marketization regions and acquirers in a robust legal environment earn higher returns than acquirers in a low marketization region and acquirers in a weaker legal environment. The results imply that acquisition returns are not even across all locations in a transitional economy. Ongoing policies should aim at bridging the variances in different locations as it impacts acquirers' returns.

Exploring governments' role in mergers and acquisitions using IVIF MULTIMOORA-COPRAS technique

“…Failure of the state to intervene in the acquisition process and avert the numerous failures may worsen the frequency of failed acquisitions, and the predicament may be unbearable on the economy. Previous studies have made similar suggestion (Chang et al, 2021;Opoku-Mensah et al, 2020).…”

“…Second, China has a unique economic and political system different from the West. The Chinese government has always maintained its central role in directing and regulating economic activities (Opoku-Mensah and Yin, 2021). Finally, China is the largest economy shifting from a central system to a market-based economy (Yu, 2019).…”

“…Keynesian economists assert that instead of allowing the market to recover by itself during failures, governments should facilitate the recovery process as such interventions are the fastest way to quicken the economy during market crises (Cevik, 2019;Opoku-Mensah et al, 2020;Silva Junior, 2020). In addition to governments' gatekeeping function, political managers of the economy often utilize tools such as loan guarantees; tax relieves and agencies to play a catalytic role to salvage production activities and boost economic activities whenever there are economic shocks (Hoshi and Kashyap, 2010;Wang and Gao, 2014;Opoku-Mensah et al, 2020). While previous studies have focused on governments' role in innovation and internalization activities (Yang and Stoltenberg, 2014;Panibratov, 2016;Panibratov and Michailova, 2019;Liu et al, 2020), less is known about how governments contribute to M&A success.…”

Assessing governments response to exogenous shocks: Considering the COVID‐19 pandemic in the Ghanaian context

“…According to the Keynesian theory, instead of waiting for the economy to transit out of a crisis period, the government should intervene to quicken the recovery process before the crisis becomes worst (Keynes, 2018 ). Thus, the surest way to support SMEs to suffice in business amid crises is for the government to support them during such periods (Opoku‐Mensah et al, 2020 ; Xiongyuan & Shan, 2013 ). Amid the COVID‐19 pandemic, governments in most countries have played two key roles.…”

Controlling shareholders' influence on acquisition decisions and value creation: An empirical study from China

“…Merger and acquisition (M&A) has come to the forefront of contemporary national and social issues and has contributed to the remarkable growth of firms in China (Opoku‐Mensah, Yin, Obiora, & Darko, 2020). Over the last four decades, M&A has been used as a corporate strategy by the Chinese government to promote the supply‐side structural reforms, fine‐tune industrial structure, resolve excess capacity and achieve innovative development (Yu, 2019).…”