Cross-border mergers and acquisitions by Chinese listed companies: A principal-principal perspective

Amy Y Y CHEN, Michael YOUNG

Research output: Contribution to journalArticlepeer-review

191 Citations (Scopus)

Abstract

Chinese listed firms have gained the world's attention with several ambitious, high-profile cross-border mergers and acquisitions. In most of these deals, the Chinese government is the largest shareholder of the acquiring firms. As such, it may be the case that the Chinese government pushes through such deals even though they are not in the best interests of minority shareholders, giving rise to principal-principal conflicts. Along these lines, we hypothesize that increased government ownership in the acquiring firm will be associated with investors viewing a cross-border merger deal in less favorable terms. In addition, we hypothesize that environmental complexity will moderate this negative relationship. We test our hypotheses with a sample of cross-border mergers and acquisitions involving Chinese firms from 2000 to 2008. We find support for the main hypothesis, that is, that investors are indeed skeptical of cross-border mergers and acquisitions deals when the government is the majority owner (i. e., principal-principal conflicts). However, we find no support for the moderating effect. We discuss the implications of these findings for researchers and practitioners and suggest future research directions.

Original languageEnglish
Pages (from-to)523-539
Number of pages17
JournalAsia Pacific Journal of Management
Volume27
Issue number3
DOIs
Publication statusPublished - 2010

Scopus Subject Areas

  • Business and International Management
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management

User-Defined Keywords

  • Cross-borders mergers and acquisitions
  • Event-study methodology
  • Government ownership
  • Principal-principal conflicts

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