Chinese Cross-Border M&As: Performance and the Announcement Effect

摘要

Following the 2007--09's financial crisis the activity of Chinese companies in cross-border mergers and acquisitions has significantly increased, until the year of 2017 when the trend has changed with a slight drop. While policymakers and economists globally argue if the growing Chinese presence is a threat to national interest, other researchers question the effectiveness of Chinese CBM&As. Much of the available literature points out that shareholder interest of the acquirer company is harmed by risky Chinese investments and the phrase "most acquisitions fail" applies to Chinese attempts. On the other hand, the Chinese firms have different motivations as new market opportunities, access to know how and political reasons. This research seeks to provide a conceptual, theoretical framework based on the motives and risks of cross-border acquisitions, focusing on the Chinese case and how these decisions affect shareholder values. The central question in this research is whether Chinese cross-border acquisitions are value adding for shareholders. Another question in the paper asks if Chinese stock markets are efficient when a cross-border acquisition is announced. The focus period of three years, from 2012.01.01 to 2015.01.01 covers a period of the 12th five-year guideline, the "Go out and Bring in". Data were collected using Wing Financial terminal. Two main approaches are used to measure the success of the acquisitions: for the short performance the cumulative abnormal return method and the buy-and-hold abnormal return methodology for the extended period. Results indicate that Chinese stock exchange markets are inefficient in the ten days post-announcement period when shareholders experience abnormal returns. Unlike in previous studies, the BHAR model suggested positive abnormal returns after one, two and three years at 5% significance level. This finding supports the view that there could be a change in the negative Chinese CBM&As performance.