Cross-Border Acquisitions by Chinese Enterprises: The Benefits and Disadvantages of Political Connections

59 Pages Posted: 9 Oct 2017 Last revised: 4 Jan 2018

See all articles by Denis Schweizer

Denis Schweizer

Concordia University

Thomas John Walker

Concordia University, Quebec - Department of Finance

Aoran Zhang

Toronto Metropolitan University (formerly Ryerson University)

Date Written: January 3, 2018

Abstract

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

Schweizer, Denis and Walker, Thomas John and Zhang, Aoran, Cross-Border Acquisitions by Chinese Enterprises: The Benefits and Disadvantages of Political Connections (January 3, 2018). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3049696 or http://dx.doi.org/10.2139/ssrn.3049696

Denis Schweizer (Contact Author)

Concordia University ( email )

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HOME PAGE: http://www.concordia.ca/jmsb/faculty/denis-schweizer.html

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Aoran Zhang

Toronto Metropolitan University (formerly Ryerson University) ( email )

TRS 1-121, Ted Rogers School of Management
55 Dundas St W
Toronto, M5B 2K3
Canada

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