Cross-border acquisitions by Chinese enterprises: The benefits and disadvantages of political connections

Denis Schweizer, Thomas Walker and Aoran Zhang

Journal of Corporate Finance, 2019, vol. 57, issue C, 63-85

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 (search for similar items in EconPapers)
JEL-codes: G15 G18 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 (54)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:57:y:2019:i:c:p:63-85

DOI: 10.1016/j.jcorpfin.2017.12.023

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