Political connections, corporate governance and M&A performance: Evidence from Chinese family firms

Weiwei Gao, Zhen Huang and Ping Yang

Research in International Business and Finance, 2019, vol. 50, issue C, 38-53

Abstract: This paper endeavors to investigate the relationship between political connections and M&A performance and the effect of family ownership on this relationship. We find that political connections reduce M&A performance in nonfamily firms and family firms with political connections have higher M&A performance than their nonconnected counterparts, implying that family involvement in management can mitigate the negative effect of political connection on firms’ M&A performance. Supplementary tests indicate that firms with good corporate governance mechanism have higher market response and there is a substitution relationship between political connections and corporate governance quality in their effect on M&A performance. In the effect on long-term M&A performance, political connection have a substitution relationship with firms’ market competition for nonfamily firms and can strengthen the positive effect of market competition for family firms. Our results remain significant when considering alterative definition of family firm and variable substitution. We contribute to the literature focusing on the interaction between political connections and firm performance.

Keywords: Political connection; Family firm; Corporate governance; M&A; China (search for similar items in EconPapers)
JEL-codes: G18 G30 G32 G34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:50:y:2019:i:c:p:38-53

DOI: 10.1016/j.ribaf.2019.04.007

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