The market value effect of digital mergers and acquisitions: Evidence from China

Abstract

Digital mergers and acquisitions (M&As) are increasingly popular around the world. This study examines the effect of digital M&As on the market value of Chinese listed enterprises by combining transaction-level and firm-level datasets from 2010 to 2019. The results of event studies show that the announcement of digital M&As leads to a rise in the short- and medium-term market value of acquiring enterprises, especially the short-term effect is statistically significant. Further multivariate analyses, which employ a difference-in-differences (DID) strategy and propensity score matching (PSM) techniques, provide causal evidence that digital M&As have a positive market value effect on acquirers, which is greater than that of non-digital M&As. This effect survives a vast array of robustness checks and displays some heterogeneity. Finally, we further verify two underlying channels (i.e., innovation and analyst coverage) through which digital M&As achieve market value creation.