Chinese overseas M&A performance and the go global policy (2010)

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Type of Content
Discussion / Working PapersPublisher
College of Business and EconomicsUniversity of Canterbury. Department of Economics and Finance
Collections
- Business: Working Papers [225]
- Working Papers in Economics [142]
Abstract
This paper investigates whether stock markets view Chinese M&As as increasing shareholder wealth. The subject is of interest given the influential role that the government plays in Chinese firms' overseas activities, and the fact that the government may have objectives other than maximization of shareholder wealth. We examine 145 OMAs by Chinese acquiring firms over the year 1994-2008. We find some evidence that markets positively responded to news of Chinese OMAs. However, we also find that markets responded less favorably after China implemented its Go Global policy encouraging overseas investment. We hypothesize two reasons for this: First, the expansion of OMAs under Go Global resulted in Chinese firms pursuing less attractive targets, on average. Second, Go Global re-directed investment towards industries having national strategic value but diminished profit value. Using a Blinder-Oaxaca decomposition procedure, we find no evidence to support this latter hypothesis. Thus, to whatever extent strategic interests may motivate China's Go Global policy, it does not appear that their pursuit has come at the expense of shareholder wealth.
Citation
Gu, L., Reed, W.R. (2010) Chinese overseas M&A performance and the go global policy. Department of Economics and Finance. 51pp..This citation is automatically generated and may be unreliable. Use as a guide only.
Keywords
Economic Development; China Economy; Overseas Mergers and Acquisitions; Event Study; Go GlobalANZSRC Fields of Research
14 - Economics::1402 - Applied Economics::140202 - Economic Development and Growth38 - Economics::3801 - Applied economics::380107 - Financial economics
15 - Commerce, Management, Tourism and Services::1502 - Banking, Finance and Investment
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