The Political Considerations in Chinese Companies’ Cross-Border Acquisitions

Shi Li

doi:doi:10.11648/j.ijber.20180705.15

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The Political Considerations in Chinese Companies’ Cross-Border Acquisitions

Shi Li

Received: 13 August 2018 Accepted: 12 September 2018 Published: 13 October 2018

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Abstract

Cross-border acquisition activity led by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Using a sample of 543 cross-border transactions made by China’s listed companies from 2000 to 2014, this paper examines whether the acquisition of foreign political sensitive assets, which may threat foreign countries’ national security, affect the likelihood of acquisition completion and acquisition performance. We find that central government-owned enterprises are more likely to acquire political sensitive assets than private-owned enterprises and local government-owned enterprises. The political sensitive acquisitions are less likely to be completed than others. The market response of acquisition announcements is significantly greater for political sensitive acquisitions than for other acquisitions, which suggests that political sensitive acquisitions increase shareholders’ wealth. Finally, we show that the positive effect of political sensitive acquisitions on shareholders’ wealth is stronger for private-owned enterprises than for state-owned enterprises. Overall, our findings suggest that Chinese companies should reduce the political risks of cross-border acquisitions and try to achieve a win-win for the nation, market and enterprises when they implement “go-out” strategy. In academic value, this paper offers a new research angle on cross-border acquisitions, which is the impact of political sensitive target on acquisition transactions.

DOI	10.11648/j.ijber.20180705.15
Published in	International Journal of Business and Economics Research (Volume 7, Issue 5, October 2018)
Page(s)	158-169
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Cross-border Merger, Acquisitions, Political Sensitive Assets, Acquisition Performance

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APA Style

Shi Li. (2018). The Political Considerations in Chinese Companies’ Cross-Border Acquisitions. International Journal of Business and Economics Research, 7(5), 158-169. https://doi.org/10.11648/j.ijber.20180705.15

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ACS Style

Shi Li. The Political Considerations in Chinese Companies’ Cross-Border Acquisitions. Int. J. Bus. Econ. Res. 2018, 7(5), 158-169. doi: 10.11648/j.ijber.20180705.15

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AMA Style

Shi Li. The Political Considerations in Chinese Companies’ Cross-Border Acquisitions. Int J Bus Econ Res. 2018;7(5):158-169. doi: 10.11648/j.ijber.20180705.15

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@article{10.11648/j.ijber.20180705.15,
  author = {Shi Li},
  title = {The Political Considerations in Chinese Companies’ Cross-Border Acquisitions},
  journal = {International Journal of Business and Economics Research},
  volume = {7},
  number = {5},
  pages = {158-169},
  doi = {10.11648/j.ijber.20180705.15},
  url = {https://doi.org/10.11648/j.ijber.20180705.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20180705.15},
  abstract = {Cross-border acquisition activity led by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Using a sample of 543 cross-border transactions made by China’s listed companies from 2000 to 2014, this paper examines whether the acquisition of foreign political sensitive assets, which may threat foreign countries’ national security, affect the likelihood of acquisition completion and acquisition performance. We find that central government-owned enterprises are more likely to acquire political sensitive assets than private-owned enterprises and local government-owned enterprises. The political sensitive acquisitions are less likely to be completed than others. The market response of acquisition announcements is significantly greater for political sensitive acquisitions than for other acquisitions, which suggests that political sensitive acquisitions increase shareholders’ wealth. Finally, we show that the positive effect of political sensitive acquisitions on shareholders’ wealth is stronger for private-owned enterprises than for state-owned enterprises. Overall, our findings suggest that Chinese companies should reduce the political risks of cross-border acquisitions and try to achieve a win-win for the nation, market and enterprises when they implement “go-out” strategy. In academic value, this paper offers a new research angle on cross-border acquisitions, which is the impact of political sensitive target on acquisition transactions.},
 year = {2018}
}

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TY  - JOUR
T1  - The Political Considerations in Chinese Companies’ Cross-Border Acquisitions
AU  - Shi Li
Y1  - 2018/10/13
PY  - 2018
N1  - https://doi.org/10.11648/j.ijber.20180705.15
DO  - 10.11648/j.ijber.20180705.15
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 158
EP  - 169
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20180705.15
AB  - Cross-border acquisition activity led by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Using a sample of 543 cross-border transactions made by China’s listed companies from 2000 to 2014, this paper examines whether the acquisition of foreign political sensitive assets, which may threat foreign countries’ national security, affect the likelihood of acquisition completion and acquisition performance. We find that central government-owned enterprises are more likely to acquire political sensitive assets than private-owned enterprises and local government-owned enterprises. The political sensitive acquisitions are less likely to be completed than others. The market response of acquisition announcements is significantly greater for political sensitive acquisitions than for other acquisitions, which suggests that political sensitive acquisitions increase shareholders’ wealth. Finally, we show that the positive effect of political sensitive acquisitions on shareholders’ wealth is stronger for private-owned enterprises than for state-owned enterprises. Overall, our findings suggest that Chinese companies should reduce the political risks of cross-border acquisitions and try to achieve a win-win for the nation, market and enterprises when they implement “go-out” strategy. In academic value, this paper offers a new research angle on cross-border acquisitions, which is the impact of political sensitive target on acquisition transactions.
VL  - 7
IS  - 5
ER  -

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Author Information

Shi Li

Xiamen National Accounting Institute, Xiamen, China

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Plain Text BibTeX RIS

APA Style

Shi Li. (2018). The Political Considerations in Chinese Companies’ Cross-Border Acquisitions. International Journal of Business and Economics Research, 7(5), 158-169. https://doi.org/10.11648/j.ijber.20180705.15

Copy | Download

ACS Style

Shi Li. The Political Considerations in Chinese Companies’ Cross-Border Acquisitions. Int. J. Bus. Econ. Res. 2018, 7(5), 158-169. doi: 10.11648/j.ijber.20180705.15

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AMA Style

Shi Li. The Political Considerations in Chinese Companies’ Cross-Border Acquisitions. Int J Bus Econ Res. 2018;7(5):158-169. doi: 10.11648/j.ijber.20180705.15

Copy | Download

@article{10.11648/j.ijber.20180705.15,
  author = {Shi Li},
  title = {The Political Considerations in Chinese Companies’ Cross-Border Acquisitions},
  journal = {International Journal of Business and Economics Research},
  volume = {7},
  number = {5},
  pages = {158-169},
  doi = {10.11648/j.ijber.20180705.15},
  url = {https://doi.org/10.11648/j.ijber.20180705.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20180705.15},
  abstract = {Cross-border acquisition activity led by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Using a sample of 543 cross-border transactions made by China’s listed companies from 2000 to 2014, this paper examines whether the acquisition of foreign political sensitive assets, which may threat foreign countries’ national security, affect the likelihood of acquisition completion and acquisition performance. We find that central government-owned enterprises are more likely to acquire political sensitive assets than private-owned enterprises and local government-owned enterprises. The political sensitive acquisitions are less likely to be completed than others. The market response of acquisition announcements is significantly greater for political sensitive acquisitions than for other acquisitions, which suggests that political sensitive acquisitions increase shareholders’ wealth. Finally, we show that the positive effect of political sensitive acquisitions on shareholders’ wealth is stronger for private-owned enterprises than for state-owned enterprises. Overall, our findings suggest that Chinese companies should reduce the political risks of cross-border acquisitions and try to achieve a win-win for the nation, market and enterprises when they implement “go-out” strategy. In academic value, this paper offers a new research angle on cross-border acquisitions, which is the impact of political sensitive target on acquisition transactions.},
 year = {2018}
}

Copy | Download

TY  - JOUR
T1  - The Political Considerations in Chinese Companies’ Cross-Border Acquisitions
AU  - Shi Li
Y1  - 2018/10/13
PY  - 2018
N1  - https://doi.org/10.11648/j.ijber.20180705.15
DO  - 10.11648/j.ijber.20180705.15
T2  - International Journal of Business and Economics Research
JF  - International Journal of Business and Economics Research
JO  - International Journal of Business and Economics Research
SP  - 158
EP  - 169
PB  - Science Publishing Group
SN  - 2328-756X
UR  - https://doi.org/10.11648/j.ijber.20180705.15
AB  - Cross-border acquisition activity led by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Using a sample of 543 cross-border transactions made by China’s listed companies from 2000 to 2014, this paper examines whether the acquisition of foreign political sensitive assets, which may threat foreign countries’ national security, affect the likelihood of acquisition completion and acquisition performance. We find that central government-owned enterprises are more likely to acquire political sensitive assets than private-owned enterprises and local government-owned enterprises. The political sensitive acquisitions are less likely to be completed than others. The market response of acquisition announcements is significantly greater for political sensitive acquisitions than for other acquisitions, which suggests that political sensitive acquisitions increase shareholders’ wealth. Finally, we show that the positive effect of political sensitive acquisitions on shareholders’ wealth is stronger for private-owned enterprises than for state-owned enterprises. Overall, our findings suggest that Chinese companies should reduce the political risks of cross-border acquisitions and try to achieve a win-win for the nation, market and enterprises when they implement “go-out” strategy. In academic value, this paper offers a new research angle on cross-border acquisitions, which is the impact of political sensitive target on acquisition transactions.
VL  - 7
IS  - 5
ER  -

Copy | Download