Intellectual property rights enforcement and mergers and acquisitions: Evidence from China

Abstract

In this paper, the impact of intellectual property rights (IPR) enforcement on merger and acquisition (M&A) activity based on provincial data in China is examined. We document a significant increase in the probability of implementing M&A bids in provinces with efficient IPR enforcement. The result is robust after considering endogeneity and using alternatives to IPR measurements. In addition, cash-financed and local M&A bids are more likely to occur in provinces with better IPR enforcement. Our results suggest that increasing R&D expenditures, alleviating financing constraints and increasing product market competition are the possible mechanisms through which IPR enforcement affects the probability of M&A activity.