The impact of state ownership, formal institutions and resource seeking on acquirers’ returns of Chinese M&A

Abstract

We examine the effects of state ownership, institutions and resource-seeking behavior on post-acquisition stock price returns of Chinese cross-border mergers and acquisitions over the period 1998-2008. Chinese acquiring firms experience negative returns ranging from 2.92 to 10.80 % in 12-and 60-month post-event periods, respectively. State ownership (SOE), interaction between R&D and SOE, formal institutional distance and acquirer size have a positive and significant impact on the long-term acquirer returns. However, the interaction between tangible resources and SOE and acquirer cash holdings appears to have a negative and significant impact on long-term returns. Overall, our results suggest that the state and institutions constitute important sources of long-term value creation for Chinese acquirers.

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