State ownership and market liberalization: Evidence from China's domestic M&A market |
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| Institution: | 1. School of Management & Economics, Beijing Institute of Technology, 5 South Zhongguancun Street, Beijing 100081, China;2. Johns Hopkins University, 100 N. Charles Street, Baltimore, MD 21201;3. Fordham University, 113 W 60th St., New York, NY 10023;4. The Peter J. Tobin College of Business, St. John''s University, Queens, NY 11439;1. Durham University Business School, Millhill Lane, Durham DH1?3LB, UK;2. Cass Business School, City University London, 106 Bunhill Row, London EC1Y?8TZ, UK;1. Gabelli School of Business, Fordham University, 45 Columbus Avenue, New York, NY 10023;2. Gabelli School of Business, Fordham University, 113 West 60th Street, New York, NY 10023;1. University of Cagliari, Department of Economics and Business, Viale Fra Ignazio 17, 09125 Cagliari, Italy;2. University of Cagliari, Department of Economics and Business, CRENoS, Viale Fra Ignazio 17, 09125 Cagliari, Italy;1. Johnson Graduate School of Management, Cornell University, United States;2. Rutgers Business School, Rutgers University, United States |
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| Abstract: | We study how state ownership affects the post-merger performance of Chinese acquirers, and find that state owned acquirers (SOEs) experience a significantly larger long-term performance improvement following mergers compared to their non-state-owned (NSOE) counterparts. When partitioning the sample period into acquisitions made prior to and following China's split-share reform of 2005, we find that the post-merger performance improvement of SOE acquirers is largely attributed to the post reform period in which controlling shareholders converted their non-tradable shares into tradable status. Our results are consistent with the interpretation that state intervention in the form of capital market liberalization and alleviation of governance problems, combined with political connections and privileged access to financing, may have a positive effect on M&A performance that outweighs the inefficiency cost of state ownership in China. |
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