Governments in the market for corporate control: Evidence from M&A deals involving state-owned enterprises

Recent evidence suggests that state-owned enterprises (SOEs) are increasingly taking over other firms. Such domestic or transborder acquisitions are the reverse of privatizations, where SOEs are the target of private investors. The question we ask is whether, because of the specific objectives and risks faced by governments, SOEs deviate from the benchmark of deals involving private firms on both sides of the merger and acquisition (M&A) transaction. To answer this new research question, we focus on a set of firm-level characteristics of the targets and acquirers involved in the deals. We built an original dataset of 31,479 deals in 138 countries drawing from Zephyr and Orbis (Bureau Van Dijk) data. Empirical results of multinomial logit and OLS models show that deals involving SOEs are clearly different from the benchmark of private–private deals. This is mainly due to the greater assets, higher solvency ratios, broader experience of deals, and closer proximity to targets of the acquirers (both public and private) under public–private, public–public, and private–public deals compared to private–private deals.     

Liquidity Shock,Credit Constraint and the Development of Private vs. State-Owned Enterprises

Based on firm level data for the period of 1998–2007, this paper attempts to explain the growth differences between private enterprises and state-owned enterprises (SOEs) in China, in the context of liquidity shocks, and institutional and financial environments. It is found that (1) when liquidity tightens, the private enterprises face stricter credit constraints than SOEs, which restricts the development of private enterprise; (2) when liquidity becomes abundant, private enterprises face fewer financial limitations and grow much faster than SOEs; (3) the effect of liquidity shocks on the growth rate gap between private enterprises and SOEs has weakened during the period 2002–2007. These findings reveal that the credit discrimination against private enterprises can be mitigated by improving institutional and financial environments, which weaken the effects of liquidity shocks on firm growth.     

Economic policy uncertainty and mergers and acquisitions: Evidence from China

This study examines the relationship between economic policy uncertainty and mergers and acquisitions (M&As) in China. Using all listed Chinese companies on the Shanghai and Shenzhen Stock Exchanges as well as 4188 ​M&A deals from the period of 2001–2018, we show that Chinese firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behavior of US firms. We further show that state-owned enterprises (SOEs) are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. SOEs are less likely to use only cash for their acquisitions during periods of high economic policy uncertainty. These results indicate the prudence of SOEs regarding acquisitions relative to non-SOEs during periods of high economic policy uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholder wealth for acquirers, and this wealth effect is more pronounced for SOEs.     

The impact of China's millennium labour restructuring program on firm performance and employee earnings1

Around the turn of the century, China experienced perhaps the largest labour restructuring program in the world. This paper uses a new dataset of Chinese industrial enterprises to examine what leads to downsizing, and tries to understand the effects of labour downsizing on firms’ technical efficiency, financial performance and employee wages. We find that downsizing is more prevalent in state‐owned enterprises (SOEs), and is more likely when enterprises are older, larger and have higher excess capacity. For both SOEs and private firms, downsizing is more likely when the prices of their products drop, but private firms respond more dramatically. Moreover, downsizing has serious short‐term costs in terms of total factor productivity (TFP). For mild downsizing, private firms suffer more deterioration in productivity. The distribution of surplus after downsizing is more favourable to labour in SOEs. For severe downsizing, both SOEs and private firms exhibit lower TFP growth with similar magnitudes. Our findings imply that private firms emphasize profit goals, while SOEs place a greater weight on labour protection.     

Business fixed investment of Chinese manufacturing firms in the post-financial crisis era

ABSTRACT

I document the investment decline of Chinese manufacturing firms after 2011, following the end of the 4 trillion fiscal stimulus program and expansionary monetary policies for combating the 2008–2009 financial crisis. I employ a difference-in-difference strategy to show that state-owned enterprises (SOEs) acted as investment stabilizers. In the post-crisis era, SOEs’ investment rates fell less compared to their private counterparts. Moreover, they had a smaller chance of exiting the market than private firms. In the face of monetary tightening, SOEs enjoyed a much smaller increase in the interest rates of their long-term debts. Although these may fuel the growth of the SOE sector relative to the private sector, and thus raised concerns for capital misallocation, the adverse effect on reallocation was dampened by shadow banking.     

所有权性质、商业信用与信贷资源配置效率

商业信用的再分配理论认为,易于获得银行信用的企业会将这些信用以商业信用的形式再分配给难以获得银行信用的下游企业。本文以2004～2007年中国工业企业数据库为样本,检验国有企业和私有企业的信用再分配功能,结果发现,尽管国有企业获得的银行信用显著多于私有企业,但提供的商业信用净额却显著少于私有企业。而且,国有企业获得的银行信用与提供的商业信用不相关,而私有企业获得的银行信用与提供的商业信用显著正相关。这些结果说明,国有企业获得更多的银行信用但并没有发挥信用再分配功能,而私有企业尽管只获得少量的银行信用却较好地发挥了信用再分配功能。这些结果意味着,如果银行体系适当增加对私有企业的信用配置,同时减少对国有企业的信用配置,可以充分发挥私有企业的信用再分配功能,提高银行体系的资源配置效率。     

Integration and autonomy in Chinese technology-sourcing cross-border M&As: from the perspective of resource similarity and resource complementarity

In this paper, we examine the match between resource relatedness and post-merger integration on technology innovation of acquiring firms to find the rationale behind technology-sourcing cross-border mergers and acquisitions (M&As) of Chinese multinational enterprises. Using a sample of 88 Chinese technology-sourcing cross-border M&As, we find that the acquirer will improve technology innovation when greater resource similarity between the acquirer and target firms is matched with a high integration degree and a low target autonomy level. Meanwhile, the acquirer can improve technology innovation when greater resource complementarity is matched with a low level of integration degree in technology-sourcing cross-border M&As. This paper provides the acquiring firms with fresh ideas of how to make the integration decisions of technology-sourcing overseas M&As. We hope to help multinational enterprises to achieve more outstanding technology innovation performance through technology-sourcing overseas M&As in an intense global competitive environment.     

THE RESPONSE OF STATE‐OWNED ENTERPRISES TO IMPORT COMPETITION: EVIDENCE FROM CHINESE MANUFACTURING FIRMS

We examine the wage and employment impact on Chinese firms of an increase in import competition associated with China's WTO accession in December 2001, with an emphasis on state‐owned enterprises (SOEs). We find that both wage and employment are negatively impacted by an increase in import competition, but firms with high state ownership cut employment less and reduce wages more than their private counterparts, suggesting that they prioritize the protection of employment over that of wages. This finding supports the notion that SOEs may have ‘multitask’ responsibilities in terms of protecting employment as well as achieving efficiency. We also find that firms with higher capital intensity reduce their wages less but cut employment more in response to intensified import competition. This provides empirical support for the efficiency wage theory.     

Diplomatic relations and cross-border investments in the European Union

This study investigates the extent to which diplomatic relations are related to cross-border merger and acquisition (M&A) activities in the European Union during the years 2001–2019. Implementing a gravity model, we find a positive relationship between diplomatic distance and M&A activities, meaning that weaker diplomatic relations are linked to increases in inward M&As. This finding holds when foreign investors target high-tech firms, are private rather than state-owned enterprises, or buy larger shares of the target companies. This evidence suggests that cross-border acquisitions could be a way for the investing firm to mitigate issues related to weak diplomatic relations, such as access to host markets’ information and technological knowledge.     

A theory of economic development and dynamics of Chinese economy

This paper constructs a theoretical model which captures the recent slowing-down of Chinese economy. In contrast with the previous literature which largely confines its focus on the resource misallocation between inefficient state-owned enterprises (SOEs) and more efficient private firms under a closed economy setting, this paper re-examines the dynamics of the growth of Chinese economy from the perspective of an open economy. In particular, this paper incorporates heterogeneous outputs and relative prices into the model, where private firms are assumed to be the major exporters and the remaining large SOEs create increasing import demand from the home country. By adding downward sloping world demand curve, our paper predicts a turning point during the transition process, as the falling relative price for exports starts to constrain and eventually slow down the growth; SOEs begin to co-exist with private firms in the economy before it is fully transformed. Our paper provides a theoretical foundation in terms of understanding the current dynamics and institutional change of Chinese economy. Additionally, this paper also provides quantitative evidence on the effects of financial development during the China's economic transition process.     

Growth opportunities and trade credit: evidence from Chinese listed firms

Private firms in China have led the explosive growth of the country’s economy, but with restricted or no access to formal financing. It is puzzling that these firms use relatively less trade credit than their counterparts in developed countries. We argue that firms with more growth opportunities should rely mainly on internal financing owing to high asymmetric information, especially in a financial market environment biased towards state-owned enterprises (SOEs) such as China. To explore growth opportunities, these firms may reduce their level of trade credit in the trade-off they face in deciding where to invest. Using panel data of Chinese non-financial listed firms for the period 2003–2013, we find that the relationship between growth opportunities and trade credit (both accounts receivable and payable) is significantly negative and is more pronounced in private firms than in SOEs. Furthermore, we also find that subsequent to the new receivable pledge policy being introduced, Chinese firms with more growth opportunities have higher accounts receivable, but similar levels of accounts payable.     

From central planning towards a market economy: The role of ownership and competition in Vietnamese firms’ productivity

This paper examines the role of ownership and market competition in Vietnamese firms’ total factor productivity (TFP) from 2001 to 2011. Making use of a large panel dataset of manufacturing firms, we find that, on average, both foreign-owned enterprises (FOEs) and state-owned enterprises (SOEs) have performed better than privately owned enterprises (POEs) in terms of their TFP levels. However, while FOEs’ TFP ranked the highest in the period 2001–2006, SOEs “closed the gap” in the period 2007–2011. Moreover, we find that market competition has been effective in enhancing average firm productivity and in reducing the gaps in efficiency across ownership types. SOEs’ remarkable performance may be linked to several concurrent factors experienced during the period 2001–2011, namely, the process of restructuring the state sector during the 2000s, the increased economic integration due to the country's accession to the World Trade Organization (2007) and, finally, the preferential access to financial capital and land granted to SOEs. While some evidence supports SOEs’ equitization as an explanation for their remarkable productivity performance, WTO accession and cheaper access to inputs do not fully explain it.     

Loan guarantees and the cost of debt: evidence from China

In this article, we examine the potential influence of loan guarantees and the nature of ownership on a company’s cost of debt. Using data on Chinese A-share listed companies from 2007 to 2014, we find that guaranteeing another entity’s debt significantly increases the guarantor’s cost of its own debt. Regarding the nature of ownership, our results indicate that the cost of debt for state-owned enterprises (SOEs) is lower than that for non-SOEs. Among SOEs, firms controlled by the central government have lower cost of debt than firms controlled by local governments. We also find some evidence that local government ownership mitigates the effects of loan guarantees on the cost of a guarantor’s own debt.     

Technology-acquiring cross-border M&As by emerging market firms: role of bilateral trade openness

This paper investigates the role of bilateral trade openness in technology-acquiring cross-border mergers and acquisitions (M&As) by emerging market firms (EMFs). The cross-border M&A, patents, and financial data from January 2000 to December 2013 have been utilised for empirical analyses. By analysing cumulative abnormal returns of the acquirer EMFs from Brazil, Russia, China, India, and Mexico, the value-creating nature of technology-acquiring cross-border M&As has been confirmed. In addition, the number of the patents owned by the target firms showed a positive and significant effect on the stock performance of cross-border acquirers. Finally, the bilateral trade openness significantly and positively moderated the relation between the innovation capability of the target firms and EMFs’ stock performance.     

A healthy hybrid: The technological dynamism of minority-state-owned firms in China

Since its economic reform began in 1979 China's economy has grown rapidly but its dynamism has not been shared by the state-owned enterprises (SOEs) at its core. Although some progress has been made, a large proportion of SOEs remain inefficient and uncompetitive, failing to exploit their advantages in scale, experience and resources. In contrast there has been rapid growth first of the collective and township enterprises, and then of the private sector, now the largest ownership type. However, private businesses continue to be handicapped by poor access to finance and other resources. These have however been made freely available to firms with only a minority state shareholding and otherwise owned by private shareholders and employees. This paper, focussing on the telecoms manufacturing sector, compares minority-state-owned hybrids favourably with other ownership types and argues that in the Chinese setting they can and should play a key role in future development.     

Financing constraints for R&D in China: the role of state ownership

We investigate financing constraints for R&D in China. We find that Chinese private firms are financially constrained for R&D, while state-owned enterprises are not. Mature private firms encounter more severe financing constraints for R&D than young private firms. Moreover, the expansion of external financing supply does not relax the financing constraints for R&D faced by private firms.     

融资约束与企业出口行为:基于工业企业数据的经验研究

采用2000—2007年的3万多家工业企业数据,本文构造了包括内源融资、商业信贷以及企业信用特征等变量的企业融资约束综合指标。基于Heckman选择模型的经验研究表明,企业融资状况的改善不仅能提高企业出口的概率,而且对其出口规模也有重要影响。研究还发现融资状况改善对外资企业出口影响最显著;与国有企业相比,民营企业虽受到更严重的融资约束,但其出口表现并未更差。此外,融资状况改善对那些高外源融资依赖度行业的企业出口具有更明显的促进作用。     

中国国有企业民营化绩效研究

本文研究中国国有企业民营化是否有效的问题。我们通过对国企民营化进程的考察来对此问题作出经验解答。根据世界银行一份对中国五个城市、覆盖六个行业的近300家国有企业(SOEs)1996—2001年间的调查数据,我们发现:(1)绩效较好的国有企业优先被民营化;(2)总体上来说,中国的民营化是富有成效的,尤其是提高了销售收入,降低了企业的成本,并最终导致企业盈利能力和生产率的大幅提高;而且在获得这些收益的同时并没有带来大规模的失业问题;(3)由民营机构控股、彻底民营化的企业比那些仍然是国有控股、部分民营化的企业绩效表现更好。     

You are suffocating me: Firm-level analysis of state-owned enterprises and private investment

Literature on whether government spending crowds out or crowds in the private sector is large, but still without an unambiguous conclusion. Using firm-level data from Ukraine, this paper provides a granular empirical investigation to disentangle the impact of state-owned enterprises (SOEs) on private firm investment in Ukraine—a large transition economy. Controlling for firm characteristics and systematic differences across sectors, the results indicate that the SOE concentration in a given sector has a statistically significant negative effect on private fixed capital formation, and that the impact of SOEs is stronger in those industries in which SOEs have a more dominant presence. These findings imply that private firms operating in sectors with a high level of SOE concentration invest systematically less than businesses that are not competing directly with SOEs.     

Merger and acquisition FDI,relative wealth and relative access to bank credit: Evidence from a bivariate zero-inflated count model

We use a bivariate zero-inflated negative binomial model to examine Japanese merger and acquisition (M&A) FDI jointly with other types of Japanese FDI (or non-M&A FDI) into the United States. We find that for firms likely to engage in FDI, their rates of FDI are affected by the financial health of their main banks. However, only the rate of M&A FDI is affected by relative wealth. The rate of non-M&A FDI is affected by profitability and firm size. Our findings show the importance of distinguishing M&A FDI from non-M&A FDI and of considering the two types of FDI jointly.