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Foreign Acquisitions and Target Firms' Performance in China

Published on Jan 1, 2017in The World Economy1.09
· DOI :10.1111/twec.12428
Qing Liu6
Estimated H-index: 6
(UIBE: Beijing Institute of Foreign Trade),
Ruosi Lu3
Estimated H-index: 3
(UIBE: Beijing Institute of Foreign Trade),
Larry D. Qiu19
Estimated H-index: 19
(HKU: University of Hong Kong)
Abstract
This paper empirically investigates the effects of foreign acquisitions on several performance measures of Chinese target firms. Using a self-constructed database that includes information on foreign acquisitions in China and the accounting information of Chinese manufacturing firms from 1998 to 2007, we find that foreign acquisitions significantly improve the productivity, sales and fixed asset investment of the target firms. We address the potential endogeneity issue in the OLS estimation using the difference-in-differences technique, with two control groups, namely the would-be targets and the propensity-score-matched targets. We also find that the performance-enhancing effect of foreign acquisitions becomes stronger when larger technology gaps are observed between the acquirers and the targets. An inverted-U relationship is observed between the post-acquisition performance of the target firms and the target firm equity that is held by the foreign acquirers. The performance effects are qualitatively different among vertical, horizontal and conglomerate acquisitions.
  • References (34)
  • Citations (4)
References34
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Cited By4
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#1Rajneesh Narula (University of Reading)H-Index: 40
#2André Pineli (University of Reading)H-Index: 2
3 CitationsSource
#1Jinlong Gu (University of Sussex)
#2Yong Yang (University of Sussex)H-Index: 12
Last.Roger Strange (University of Sussex)H-Index: 22
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Source
#1Qing Liu (UIBE: Beijing Institute of Foreign Trade)H-Index: 6
#2Ruosi Lu (UIBE: Beijing Institute of Foreign Trade)H-Index: 3
3 CitationsSource
#1Qing Liu (UIBE: Beijing Institute of Foreign Trade)H-Index: 6
#2Ruosi Lu (University of Birmingham)H-Index: 3
Last.Chao Zhang (UIBE: Beijing Institute of Foreign Trade)H-Index: 2
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7 CitationsSource
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