Government audit supervision and enterprise mergers and acquisitions

Shangkun Liang, Weizhi Xue and Nan Lin

China Journal of Accounting Studies, 2024, vol. 12, issue 1, 25-46

Abstract: As an important part of the national political system, government audits play a significant role in supervising and restricting enterprises. Since 2010, the National Audit Office of China has repeatedly disclosed the problems regarding enterprises’ M&A to prevent the loss of state-owned assets. This study takes listed companies controlled by the central enterprises of A-shares from 2008 to 2018 as a sample to investigate the impact of government audit supervision on M&A. We find that government audit supervision reduces the number and scale of M&As. Further research shows that government audits can reduce enterprises’ M&A premiums and affect payment methods. Finally, government audits significantly improve the short- and long-term performance of M&As. These findings show that Chinese government audits positively affect corporate governance, curbing M&As that damage enterprise interests. This study provides micro-level evidence of the governance effect of government audits on the scientific decision-making of enterprises.

Date: 2024
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DOI: 10.1080/21697213.2023.2239676

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