Chinese Overseas M&A Performance and the Go Global Policy

Lulu Gu and W. Reed ()

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: It is well-known that government plays an important role in the business activities of Chinese firms. Less certain is the effect this influence has on the wealth of those firms’ shareholders. We contribute to the literature by analyzing stock market reactions to announcements by Chinese firms of overseas mergers and acquisitions (OMAs). OMAs are of particular interest because there can exist a conflict between the interests of the public sector in acquiring overseas assets, and the interests of the private sector in maximizing shareholder wealth. Our main data set consists of 213 observations of 157 OMA events that occurred between 1994-2009, using share market returns from the Shanghai, Shenzhen, Hong Kong, and U.S. markets. The aggregation of share price data across multiple markets, and the listing of firms in multiple exchanges, raise econometric issues for the standard event-study methodology. To address these, we use a new, feasible generalized least squares (GLS) procedure developed by Gu (2011). Based upon an analysis using both aggregated and disaggregated samples, and of daily and cumulative abnormal returns, we find consistent evidence that (i) Chinese OMAs have not lowered the wealth of shareholders of Chinese acquiring firms, and (ii) shareholders of Chinese acquiring firms have not fared worse under Go Global than before Go Global.

Keywords: Overseas Mergers and Acquisitions; Event study; Go Global (search for similar items in EconPapers)
JEL-codes: F21 G34 O25 O53 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012-04-25
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Chinese overseas M&A performance and the Go Global policy (2013)
Working Paper: Chinese Overseas M&A Performance and the Go Global Policy (2011)
Working Paper: Chinese Overseas M&A Performance and the go Global Policy (2010)
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