The impact of state ownership, formal institutions and resource seeking on acquirers’ returns of Chinese M&A

This study investigates the long-term acquirer returns of Chinese cross-border mergers and acquisitions (CBM&A) over the period of 1998-2008. Using Buy and Hold and Calendar Time methods, we find that Chinese acquiring firms experience negative returns ranging from 2.92% to 10.80% in 12-month and 60-month post-event periods respectively. Regarding the factors influencing returns, state ownership (SOE), interaction between R&D and SOE, formal institutional distance, acquirer size have positive and significant impact on the long-term acquirer returns. However, interaction between tangible resources and SOE and acquirer cash holding appear to have negative and significant impact on long-term returns. Overall, our results suggest that the role of government through SOEs is an important source of value creation for CBM&A in Chinese emerging economy.