Investor Protection and Firm Performance: Evidence from China's Cross-Border Mergers and Acquisitions

Abstract

Using a sample of 1470 cross-border mergers and acquisitions from 1997 through 2011, it finds two distinctive features of the financial market in China. First, better investor protection mechanisms at target countries, such as better law and order conditions, lower public sector corruption and better protection of creditor rights, are not creating wealth for shareholders of bidding firms around China’s outward cross-border mergers. Second, firm-level corporate governance mechanisms are more related to the valuation effects than the country level investor protection indicators and hence are central in explaining firm values in China.