Cross-Border Acquisitions by Chinese Enterprises: The Benefits and Disadvantages of Political Connections

Schweizer, Denis; Walker, Thomas; Zhang, Aoran

doi:10.2139/ssrn.3049696

Cited by 22 publications

(31 citation statements)

References 36 publications

(26 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Indeed, Li and Qian (2013) show that in Chinese target firms with politically connected CEOs, there is less resistance to takeovers, as the target's management may be instructed that an M&A bid should comply with regional or national political targets in terms of employment or strategic alliances. Although Li and Qian (2013) do not investigate long-run deal performance, Schweizer, Walker, and Zhang (2017) confirm the "political empire building" hypothesis by showing that politically connected CEOs in Chinese firms are more likely to complete a deal, even if these deals earn lower announcement returns and have worse long-run operating performance. Zhou et al (2015) in contrast highlight the beneficial effects of political connections in SOEs and find that takeover announcements of Chinese target SOEs yield higher bidder announcement returns than transactions involving privately-held target firms.…”

Section: Political Connections Between Ceos and Local Governments Arementioning

confidence: 92%

Failure and success in mergers and acquisitions

Renneboog

Vansteenkiste

2019

Journal of Corporate Finance

182

View full text Add to dashboard Cite

This paper provides an overview of the academic literature on the market for corporate control, and focuses specifically on firms' performance around and after a takeover. Despite the aggregate M&A market amounting to several trillions USD on an annual basis, acquiring firms often underperform relative to non-acquiring firms, especially in public takeovers. Although hundreds of academic studies have investigated the deal-and firm-level factors associated with M&A announcement returns, short-run returns are often not sustained in the long run. Moreover, the wide variety of performance measures and heterogeneity in sample sizes complicates the drawing of accurate and unambiguous conclusions. In this light, our survey compiles the recent literature and aims to identify the areas of research for which short-run returns predict (or fail to predict) long-run performance. We find that post-takeover deal performance is affected by key determinants including serial acquisitions, CEO overconfidence, acquirer-target relatedness and complementarity, and shareholder intervention in the form of voting or activism.

show abstract

Section: Political Connections Between Ceos and Local Governments Arementioning

confidence: 92%

Failure and success in mergers and acquisitions

Renneboog

Vansteenkiste

2019

Journal of Corporate Finance

182

View full text Add to dashboard Cite

show abstract

“…The inefficient market mechanism expands the power of the government, making the power inequality in the government–business relationship more apparent. Thus, political resources are particularly precious and scarce in less market‐oriented areas (Rao‐Nicholson et al., 2019; Schweizer, Walker, & Zhang, 2019). It is reasonable to expect that political connections would be more likely to bind firms to the government in less market‐oriented cities since firms rely more on the government, and thus, cannot afford the cost of defying government demands in these regions.…”

Section: Institutional Background and Hypothesesmentioning

confidence: 99%

Political connections and corporate social responsibility: Political incentives in China

Liu

2020

Business Ethics: A Eur Rev

View full text Add to dashboard Cite

To explore the motivations underpinning corporate social responsibility (CSR) decisions in China, a country characterized by extensive government intervention, this paper investigates whether building a good relationship with the government is a political incentive that is driving firms to conduct CSR by examining the effects of political connections on the latter. Our results indicate that politically connected firms exhibit better CSR. However, the effect is considerably more significant for firms with existing political relationships. Additionally, findings show that the effect is more prominent in firms for which political connections are more valuable, namely, non‐state‐owned enterprises, small firms, and firms operating in less market‐oriented cities, indicating that CSR can serve as a differentiation strategy to compete against other bidders. Dividing CSR activities into economic, environmental and social aspects, we find that the social‐based activities are more likely to be driven by political motivations. By categorizing CSR and political connections, this paper not only expands the scope of political CSR and renders the generated results that have been mixed together more distinguishable, but also provides a more precise understanding of the fundamental drivers of CSR in China from the perspective of resource exchange.

show abstract

“…One possible reason is that politicians extract rents and pursue political objectives through these connections, which would reduce firm value (Chen, Sun, Tang, and Wu, 2011;Fan et al, 2007;Pan and Tian, 2017). The other potential reason is weak corporate governance in firms with political connections (Cao, Pan, Qian, and Tian, 2017;Schweizer, Walker, and Zhang…”

Section: Current Research Show That Political Connection Can Generatementioning

confidence: 99%

The value of political ties for firms experiencing enforcement actions: Evidence from China

Zheng

2019

The British Accounting Review

View full text Add to dashboard Cite

We study the value of political ties for firms experiencing enforcement actions. We find that stronger corporate political ties alleviate the negative market shocks caused by enforcement action announcements of listed firms in China, and the relationship between political ties and market reaction is more pronounced for enforcement actions that signal loss of market credibility than for enforcement actions that signal loss of political ties and in regions with greater government intervention. We further find that firms with stronger political ties experience larger increases in long-term debt after enforcement actions, suggesting that it is the investors' expectation of government support to connected firms that mitigates the negative market reaction.

show abstract

Cross-Border Acquisitions by Chinese Enterprises: The Benefits and Disadvantages of Political Connections

Cited by 22 publications

References 36 publications

Failure and success in mergers and acquisitions

Failure and success in mergers and acquisitions

Political connections and corporate social responsibility: Political incentives in China

The value of political ties for firms experiencing enforcement actions: Evidence from China

Contact Info

Product

Resources

About