External sources of political connections: Financial advisors and Chinese acquisitions

Abstract

This study considers the effects of an external form of political connection, namely, politically connected financial advisors, on the value creation of Chinese acquiring firms over the period 2004–2014. Using data consisting of 1,623 Chinese mergers and acquisitions (M&As) deals, we show that politically connected financial advisors create significantly higher market value for acquiring firms, after controlling for firms' own political connections and reputation. Further analysis indicates that the appointment of political advisers can improve an acquiring firm's long‐term industry‐adjusted operating performance and help acquirers reduce bid premiums. We show that private firms and stock‐pay acquisitions are more likely to appoint politically connected financial advisors in M&A transactions, whereas our findings remain unchanged after controlling for endogeneities.

Internal capital market mergers in weak external market environment: An emerging market evidence

“…First, in line with recent M&A literature (Amewu & Alagidede, 2018;Bi & Wang, 2018;Ferreira et al, 2009;Liu, Padgett, & Varotto, 2017), we include basic deal characteristics. First, in line with recent M&A literature (Amewu & Alagidede, 2018;Bi & Wang, 2018;Ferreira et al, 2009;Liu, Padgett, & Varotto, 2017), we include basic deal characteristics.…”

“…We collect M&A data from China Stock Market and Accounting Research (CSMAR) database (e.g., Jian & Wong, 2010;Liao et al, 2014;Bi & Wang, 2018). We apply following set of criteria for M&A deals made by firms listed on Shanghai and Shenzhen Stock Exchanges from January 1, 2000, to December 31, 2014: (a) The merger deal must be successful.…”

“… Controls i represents a number of control variables. First, in line with recent M&A literature (Amewu & Alagidede, ; Bi & Wang, ; Ferreira et al, ; Liu, Padgett, & Varotto, ), we include basic deal characteristics. LOGRS is the log of relative deal size.…”

“…In China, the type of controlling ownership has strong influence over business decisions (Bi & Wang, 2018;Chen et al, 2008;Wang et al, 2019). In Table 5, we conduct an additional analysis by repeating Table 4 regressions using subsamples classified by the type of controlling shareholders, namely, privately owned enterprises (POEs) and different types of SOEs, central SOEs, and local/provincial SOEs.…”

Controlling Shareholder Stock Pledge, Aggravated Expropriation and Corporate Acquisitions

“…We use the following criteria to filter our M&A sample: (1) acquirers would be A-share publicly-listed companies; (2) transaction type is limited to mergers, tender offers, and acquisitions of assets; (3) we exclude the observations with more than one deal announced during one year to mitigate the concern of contamination issue (e.g., Zhou et al, 2015;Bi and Wang, 2018); and 4the acquirers must have necessary data in our first M&A tendency regression. Our final M&A sample includes 6,553 deals.…”