Cross-Border Acquisitions by Chinese Enterprises: The Benefits and Disadvantages of Political Connections
59 Pages Posted: 9 Oct 2017 Last revised: 4 Jan 2018
Date Written: January 3, 2018
This paper explores whether and how political connections affect the likelihood of completing a cross-border M&A deal for Chinese publicly listed, but privately-owned enterprises (POEs) and the resulting firm performance. In line with our proposed political connection trade-off theory, we find that POEs with politically connected top managers are more likely to complete a cross-border M&A deal than POEs with no such connections, but that this comes at the cost of negative announcement returns and subsequent lower accounting performance. These findings support the idea that politically connected top managers engage in “political empire building” behavior at the cost of shareholders’ wealth.
Keywords: China, Cross-Border M&As, Emerging Markets, Multinational Enterprises, Political Connections
JEL Classification: G15, G18, G34
Suggested Citation: Suggested Citation