Does M&A Financing Affect Firm Performance under Different Ownership Types?

Jiaqi Chen, Xi Zhao, Xiaotong Niu, Ying Han Fan and Grantley Taylor
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Jiaqi Chen: College of Management and Economics, Tianjin University, Tianjin 300072, China
Xi Zhao: College of Management and Economics, Tianjin University, Tianjin 300072, China
Xiaotong Niu: College of Management and Economics, Tianjin University, Tianjin 300072, China
Ying Han Fan: School of Accounting, Curtin University, GPO Box U1987 Perth, Western Australia, Australia
Grantley Taylor: School of Accounting, Curtin University, GPO Box U1987 Perth, Western Australia, Australia

Sustainability, 2020, vol. 12, issue 8, 1-15

Abstract: Mergers and acquisitions (M&A) are an essential way for enterprises to achieve sustainable development. As large sums of money are typically involved in M&A transactions, financing is a vital factor in outcomes. This study examines the relation between equity and debt financing of M&A on subsequent performance, and the effect of ownership (state-owned enterprises versus private-owned enterprises) on M&A performance in China. We are motivated to examine the relation between financing methods and M&A performance in China because the differences in ownership, resource availability and policy support by the government for many firms may affect subsequent performance. Using a large sample of Chinese A-share listed companies between 2009 and 2016, we find that equity-financed M&A transactions lead to significantly better performance than debt-financed transactions. Equity-financed M&A transactions of state-owned enterprises (SOEs) perform significantly better as compared to debt-financed M&A, whereas equity-financed M&A transactions of private-owned enterprises (POEs) have little effect on their performance. This study extends our insights into the relation between M&A financing types and firm performance under different ownership types in the context of emerging markets.

Keywords: M& A performance; financing method; ownership; sustainable development; emerging markets (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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