External sources of finance and value creation of Chinese mergers and acquisitions: does ownership type matter?

摘要

Purpose - This paper aims to investigate the effects of external sources of finance and ownership type on the value creation of Chinese acquiring firms. Design/methodology/approach - The data set consists of domestic-listed mainland Chinese firms engaged in domestic mergers and acquisitions during the period 2004-2012. Standard event study methodology and cross-sectional regression analysis are used to examine the relationship between external finance, ownership type and value creation of the acquiring firms. Findings - This paper finds that whereas bank financing is positively related to the firm value of privately-owned enterprises (POEs), bank financing has a negative but insignificant influence on the firm value of state-owned enterprises (SOEs). Moreover, equity financing has a negative and significant effect on the value creation of SOE acquirers, however, this appears not to be the case of POEs. Research limitations/implications - The results suggest that the capital markets in China take into consideration the discriminatory and cheap access to bank loans available to SOEs as negative signals to stock markets, which cause capital markets to punish SOEs through price depreciatioa Conversely, capital markets reward POEs in respect of Chinese banks' discrimination against POEs in bank financing. Practical implications - The results suggest that the capital markets in China take into account the discriminatory and cheap access to bank loans available to SOEs as negative signals to stock markets, which cause capital markets to punish SOEs through price depreciation. Conversely, capital markets reward POEs in respect of Chinese banks' discrimination against POEs in bank financing. Originality/value - The results of this study show that external sources of finance and ownership type influence acquiring firm value in an environment where the corporate governance system is weak and the banking sector is dominated by state banks. Further reforms in the financial sector, particularly, in the corporate governance system appear warranted.