The Impact of Supply Chain Network Centrality on Sustainable Mergers and Acquisitions: Evidence from China

Ming Yuan, Jingya Dang (), Yujie Hong, Di Gao and Ziyi Xu
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Ming Yuan: Wuhan Lingzhi Yinghang Education Technology Co., Ltd., Wuhan 430000, China
Jingya Dang: Gies College of Business, University of Illinois at Urbana-Champaign, Champaign, IL 61820, USA
Yujie Hong: China Merchants Bank Sydney Branch, Sydney 201101, Australia
Di Gao: School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China
Ziyi Xu: School of International Business, Southwestern University of Finance and Economics, Chengdu 611130, China

Sustainability, 2024, vol. 16, issue 19, 1-24

Abstract: Mergers and acquisitions (M&As) are key drivers for resource integration and the operational efficiency of enterprises. Companies that hold central positions within supply chains may leverage their strategic location to reduce information asymmetry, enhancing their ability to engage in sustainable activities. However, research on the role of supply chain network centrality in M&A decisions remains underexplored. This study aims to empirically examine whether and how centrality in supply chain networks enhances the likelihood and success of M&A activities, contributing to both theory and practice in corporate strategy. In particular, we construct a novel measure of firm centrality within the supply chain and utilize panel data from Chinese A-share listed companies spanning 2008 to 2021. Our findings reveal that the central position of supply chain networks promotes the probability and frequency of mergers and acquisitions. Mechanism analysis reveals that gaining information advantages and relieving financial constraints are two key channels through which the supply chain network promotes mergers and acquisitions. Furthermore, the effects are more pronounced for firms with non-state ownership, with closer proximity to customers or suppliers, with higher operational risk, and with growth and decline phases. A series of robustness tests support these results, including alternative measures, alternative estimating methods, and sub-sample tests. Moreover, central supply chain companies exhibit better long-term financial performance following mergers and acquisitions. This paper enriches our understanding of the roles of supply chain networks in firms’ mergers and acquisitions and holds important practical implications for companies seeking to achieve sustainable and long-term development.

Keywords: supply chain network centrality; information advantage; financing constraint; M&As (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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