Abstract
The Chinese market for corporate control has recently gained much academic attention. This research constructs a sample of 159 cross-border acquisitions made by 123 Chinese firms between 2010 and 2014 and relates the roles of governance and culture to the wealth effects of mergers. First, the shareholders of Chinese bidders experience gains upon the announcement of overseas mergers. Second, country- and firm-level governance notably affects the cumulative abnormal returns of Chinese acquirers. Lastly, and however, the cultural distance per Hofstede’s (1980) four cultural dimensions does not appear to be a significant factor in determining the shareholder wealth of Chinese purchasers.
Highlights
The Chinese market for corporate control has recently gained much academic attention
According to the statistics of overseas investments by Chinese firms publicized by the Chinese government since 2003, the total deal size amounted to US$ 122.9 billion in 2014, which is 40 times the reported value of US$ 2.7 billion in 2002
Through the results of their study on Chinese companies’ governance and performance, Cheung et al (2010) empirically prove that good corporate governance can positively affect a company’s market value, which suggests that Chinese firms with good governance will have a higher Tobin’s Q than do companies with lower levels of governance
Summary
The Chinese market for corporate control has recently gained much academic attention. In addition to cross-country differences in corporate governance, non-economic traits such as cultural and geographical distance are known to affect the outcomes of cross-border mergers (Erel et al, 2012) None of those traits have been analyzed as they pertain to foreign acquisitions by Chinese corporations. Through the results of their study on Chinese companies’ governance and performance, Cheung et al (2010) empirically prove that good corporate governance can positively affect a company’s market value, which suggests that Chinese firms with good governance will have a higher Tobin’s Q than do companies with lower levels of governance. According to the positive spillover by law hypothesis suggested by Martynova and Renneboog (2008), the better the corporate governance of acquiring firms, the higher are the wealth effects shown for both the acquiring and target companies. We conclude with the implications of this study and future research ideas in the last section
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
