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ID: 143776

Cross-Border mergers and acquisitions by Chinese firms: value creation or value destruction? / Wu, Xianming; Yang, Xingrui ; Yang, Haibin ; Lei, Hao

Wu, Xianming	Article
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Summary/Abstract

Mixed results from studies on Chinese cross-border mergers and acquisitions (M&As) have been a puzzle for both academia and business professionals over the years. Do these M&As create value when Chinese firms acquire foreign target firms suffering heavy losses and even on the verge of bankruptcy? This article explores the wealth effect of M&As conducted by Chinese firms as well as the relevant factors from the asset-seeking perspective. The authors use 180 M&A cases conducted by listed firms in China between 2002 and 2012 as samples and examine their wealth effects in a method of event study. The results show that these M&A activities have produced significant positive wealth effects during the event window of [–10, 10]. The authors then study the key factors affecting wealth effects. The findings reveal that an acquiring firm’s strength via research and development (R&D) and M&A experience generates significant positive impacts on the wealth effect. The findings also reveal that an innovation orientation and development stage of host countries helps create positive wealth effects; vertical M&As are particularly favored by the market since they can gain easier access to R&D, marketing channels or mineral resources.

Key Words

R&D ; Chinese Firms ; Acquisitions ; Cross-Border Mergers ; Value Creation ; Value Destruction

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ID: 112839

Impact of the institutional environment on the choice of entry : evidence from Chinese enterprises / Wu, Xianming; Liu, Xueyuan; Huang, Qihai

Wu, Xianming	Journal Article
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2012.

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This article studies the influence of the institutional environment on Chinese enterprises' selection of entry mode for overseas investment from three dimensions: regulation, normalisation and imitation mechanisms. The results show that the regulation mechanism has a significant influence on the choice of mode of entry for overseas investment. Chinese enterprises tend to make investments in the form of acquisitions and wholly-owned subsidiaries in countries with sound policies, laws and formal institutional factors. The normalisation mechanism takes into consideration the influence of informal institutional factors including cultural distance mainly through adjustment of ownership mode. The greater the cultural distance between the host country and China, the higher the possibility that Chinese enterprises will opt for the joint venture mode of entry. The imitation mechanism takes into account the degree of integration between parent and subsidiary companies. Chinese enterprises which are highly integrated are likely to enter the local market via greenfield investment. Unlike the transnational enterprises of many developed countries, international experience has no significant impact on Chinese enterprises' choice of mode of entry for overseas investment.

Key Words

China ; Institutional Environment ; Chinese Enterprises ; Choice of Entry Mode

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