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The Political Considerations in Chinese Companies’ Cross-Border Acquisitions

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.

Published in International Journal of Business and Economics Research (Volume 7, Issue 5)
DOI 10.11648/j.ijber.20180705.15
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), 2018. Published by Science Publishing Group

Keywords

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

References
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Cite This Article
  • 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
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    AU  - Shi Li
    Y1  - 2018/10/13
    PY  - 2018
    N1  - https://doi.org/10.11648/j.ijber.20180705.15
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    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
    JO  - International Journal of Business and Economics Research
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    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
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  • Xiamen National Accounting Institute, Xiamen, China

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