Do European Acquisitions in China Outperform?

Abstract

We examine bidder returns for European acquisitions in China. In particular we study whether the bidder returns in the Chinese emerging economy are larger than those in the United States. For both target countries no significant cumulative abnormal bidder returns are found and we do not find significant differences between acquisitions in China and in the USA, except for a significant lower standard deviation of bidder returns in China. Regression analysis confirms that acquisitions in China do not outperform those in the USA. Univariate tests indicate that acquisitions in China perform worse if the target is a private company or when the acquirer comes from the European continent, but this result is not confirmed with regression analysis. These results suggest that Chinese targets are normal targets in the world of cross-border acquisitions. The only relative benefit of acquisitions in China is that it is significantly less likely to result in fierce negative reactions of investors.