Tariff cost and cross-border M&A affiliate sales: Evidence from China

Cross-border mergers and acquisitions (M&A) is a major form of foreign direct investment (FDI). In contrast to many developed countries, the majority of China’s cross-border M&As are vertical rather than horizontal. I study the difference in the reaction to tariff of horizontal and vertical M&A subsidiary sales. The baseline OLS regressions show that as export tariff cost increases, cross-border M&A affiliate sales relative to export rises, and the effect mainly comes from vertical affiliates, especially in downstream subsidiaries. The main results are robust to the Poisson pseudo maximum likelihood (PPML) regressions and an instrumental variable (IV) approach. A simple model is developed to reconcile the empirical findings when horizontal and vertical M&As co-exist in the same market and further tested at both the extensive and intensive margins. The results offer new insights to understanding the performance of M&As from developing economies.     

IPO relative difficulty,M&A option and size effect

Size effect in the Chinese stock market is huge from 2012 to 2017. We empirically identify a driving force behind the effect: M&A option caused by IPO and M&A policies changes. We show that the M&A frequency increases and the acquirers' market value deceases as the IPO relative difficulty rises, small firm premium is positively related to both IPO relative difficulty and M&A frequency, and among the listed firms that have stronger tendency to merge or acquire a private firm, size effect is significantly larger. These results hold when controlling reverse merger probability. In sum, we reveal a new mechanism: Compared with a large public firm, a small one is more likely to acquire a private firm with discount since both the acquired and the acquirer benefit more, so the stock price of a small firm contains a larger part of M&A option. This option value increases as IPO relative difficulty rises.     

Subsidizing R&D Cooperatives

A framework is developed with which the implementation of two commonly used R&D-stimulating policies can be evaluated: providing R&D subsidies and sustaining the formation of R&D cooperatives. Subsidized R&D cooperatives can also be analyzed. The analysis shows that providing R&D subsidies is more effective in raising private R&D investments than sustaining R&D cooperatives. Moreover, optimally subsidizing cooperative R&D or noncooperative R&D leads to the same level of R&D activity. Sustaining R&D cooperatives thus appears to be a redundant industrial policy, all else equal.     

Local political corruption and M&As

We examine the relation between local political corruption and firms' cross-province M&As using provincial-level data on corruption in China. The results show that firms in more corrupt regions are less likely to engage in cross-province M&As. Further analyses reveal that the effects of local corruption on the probability of cross-province M&As are stronger when corrupt officers have greater impeding benefits or lower impeding costs. Meanwhile, Both ex-ante intervention and ex-post punishment are important channels through which corrupt officers hinder firms' cross-province M&As. Moreover, informal institutions, such as social capital and informal networks can help to alleviate the negative impact of political corruption on firms' cross-province M&As.Our findings show that in the context of highly government intervention, cross-province M&As not only cannot be an effective channel to shield from expropriation, but are themselves highly distorted and lead to significant economic efficiency losses.     

Ownership concentration and financial policy of China's listed firms

This study examines the role of ownership concentration, measured by the top-five shareholders' equity ownership, in shaping corporate finance policies in China. Among privately-owned enterprises (POEs), ownership concentration has negative and positive effects on their debt and cash reserves, respectively, consistent with controlling shareholders' incentives to stave off business failures and ride out adverse future circumstances. These effects are more pronounced if POEs have high market-to-book, suggesting that growth opportunities heighten their controlling shareholders' desire to avoid debt and hoard cash. Although ownership concentration has similar effects on debt and cash in state-owned enterprises (SOEs), these effects in SOEs appear to reflect management discretion or conservatism. Our evidence suggests that ownership concentration is a key driver of corporate finance in an emerging market, but private and state ownership concentrations have seemingly similar but qualitatively different consequences.     

为什么国有企业越来越垄断?

近年来,我国的国有企业在产业政策的保护下表现出越来越垄断的趋势。本文运用共同代理模型解释了这种政策倾向的形成原因。代表各个产业部门的利益集团围绕政府的政策展开博弈,政策的形成是政府对各个产业利益集团进行平衡的结果。但是,政府对国有部门的重视程度超过非国有部门。随着国有企业逐渐从许多产业退出,余下的国有部门越来越缺乏其他利益集团的制约,政府因而就倾向于保护这些国有部门的垄断利益。     

Which external shock matters in small open economies? Global risk aversion vs. US economic policy uncertainty

We investigate the roles of global risk aversion and US economic policy uncertainty in contributing to financial and macroeconomic fluctuations in small open economies (SOEs). We use a panel of forty SOEs that includes both advanced economies (AEs) and emerging markets economies (EMEs) to find that SOEs’ financial and economic activities exhibit relatively short-lived and robust reactions to risk aversion shocks, while responding smoothly and persistently to US policy uncertainty shocks, consistent with Bloom et al. (2018). A novel finding of this paper is that the responses of AEs and EMEs are asymmetric: AEs react more strongly to US policy uncertainty shocks while EMEs are more sensitive to risk aversion shocks. These results suggest that the channels through which each shock is transmitted to SOEs may vary.     

THE IMPACT OF M&As ON SHAREHOLDER WEALTH: EVIDENCE FROM TAIWANESE CORPORATIONS

This study, using forty‐six M&A events in Taiwan between 1987 and 1998, investigates the effects of M&As on shareholder wealth. The shareholders of the acquiring firms gain modestly positive abnormal returns around the announcement dates. We also distinguish M&As of different purposes, finding that M&As for technology‐acquiring purposes are most favored by the market, while vertical M&As are detrimental to shareholder wealth.     

Beyond privatization: Institutional innovation and growth in China's large state-owned enterprises

This article demonstrates that China's large state-owned enterprises (SOEs) are not stagnant fossils waiting to die. Under economic reform policies this sector has undergone large change due to enhanced enterprise autonomy, the impact of market forces, rapid growth of domestic demand for upstream products, strategic integration with the world economy and the state's policy to promote large businesses. China's large SOEs are developing new institutional forms that do not neatly fit into existing patterns. China is experimentally changing its institutions through a combination of central policy, local initiative and interaction with international investment. This presents a challenge to the “transitional orthodoxy” and to ideas concerning property rights in development economics. There is not a universal model of property rights and government action that works best in all circumstances. China's experience with the reform of large SOEs shows the diverse possibilities for effective industrial institutions.     

Impact of Terrorism on Cross-Border Mergers and Acquisitions (M&As): Prevalence,Frequency and Intensity

This paper contributes to the literature on the impact of terrorism on international business by focusing on the specific case of cross-border mergers and acquisitions (M&As) using bilateral data for 59 countries over the period 2000–2011. We are interested in the following set of questions: (a) the impact of source and host country terrorism on bilateral M&A flows using various measures of terrorism (i.e. prevalence, frequency and intensity); (b) whether terrorism affects developing countries differently; (c) whether good institutions in developing host countries can offset the negative effects of terrorism; and (d) whether terrorism incidents in a particular economy has negative spillovers to its neighbors. To preview the main conclusions, we find that an augmented gravity model fits the data well. While the occurrence of terrorism in either the host or source does not appear to have any impact on bilateral M&A, the frequency and intensity of terrorist attacks significantly deter M&A flows, especially in the latter. We also find that good institutions negate the impact of terrorist attacks in the developing host country. There is also some evidence that regional spillovers reduce M&As in the host country.     

Understanding the productivity effect of M&A in Japan: An empirical analysis of the electronics industry from 1989 to 1998

This study examines the effect of mergers and acquisitions (M&A) on productivity. According to the literature, the effect of a merger or acquisition on an acquiring firm's productivity is small. We examine the extent to which self-selection of M&A contributes to the weak M&A effect. Using data on Japanese electronics firms from 1989 to 1998, our empirical analysis shows that without controlling for the self-selection of M&A, M&A have a weak or insignificant effect on total factor productivity (TFP), as suggested in the literature. However, controlling for self-selection reveals a positive and large effect on productivity. We find a negative correlation between M&A decisions and TFP caused by self-selection, which makes the M&A effect appear negligible when it is not controlled for. These results suggest that M&A served as an effective device for improving the productivity of the electronics firms in our sample.     

R&D intensity and domestic and cross-border M&A of Japanese firms before domestic M&A deregulation

In this paper, we examine the determinants of mergers and acquisitions (M&A) in Japan prior to the deregulation of domestic M&A transactions. We reveal that firm growth strategies and institutional differences in domestic and cross-border transactions are key determinants of the differences in M&A behavior. Our estimates show that domestic M&A activities are negatively related to research and development (R&D), suggesting that low technology-intensive firms have a tendency to engage in domestic M&A. For cross-border M&A, firm R&D activities have a significant positive effect, implying that a firm's own technology is important for absorbing foreign technology or competing in the host country.     

吸收能力和贸易政策对FDI技术溢出的影响分析——基于中国工业部门面板数据的实证研究

FDI的技术溢出不是自发产生的,溢出效应受到东道国国内的政策和经济环境的影响,其中两个重要因素是东道国的吸收能力和贸易政策。本文利用工业部门2005—2008年的数据,实证分析了FDI溢出效应。在考虑了前向联系和后向联系中的直接影响和间接影响情况下,检验了FDI横向溢出和纵向溢出,分析了吸收能力和贸易政策对FDI溢出效应的影响。我国的横向溢出和后向溢出不显著,前向溢出显著;吸收能力和贸易政策对外商在华投资的溢出效应产生不利影响。

Abstract：

FDI spillovers are assumed not to be automatic but are hypothesized as being a function of the domestic policies and economic environment in host countries.Two determinants have been generally recognized,the absorptive capability and the trade policy.This paper examines FDI spillovers using the industrial data during the period 2005—2008.Taking the direct and indi-rect effect into forward and backward linkages,both horizontal and vertical FDI spillovers are examined,and the effect of the absorptive capability and the trade policy on FDI spillovers are analyzed.The results show that the spillovers through horizontal spillovers and backward link-ages are insignificant,while positive spillovers through forward linkages are statistically significant.Absorptive capability and trade policy produce unfavorable effects on FDI spillovers.     

Long live China’s state-owned enterprises: deflating the myth of poor financial performance

China’s industrial state-owned enterprises (SOEs) are commonly perceived as performing poorly. This leads authors to conclude that SOE reform so far has been a failure, and to recommend all-out privatization. Industrial SOE profitability indeed declined drastically in the course of the reform period, and industrial SOEs are always less profitable than industrial non-SOEs. However, the gap between SOEs and non-SOEs can be explained by just two factors: SOEs face higher circulation tax rates than non-SOEs, and have a higher capital intensity. In as far as these are the result of government policies and historical factors discriminating against SOEs, privatization of SOEs may improve these enterprises’ profitability levels, but privatization is not a necessary condition. The decline in SOE profitability over time furthermore is well explained by economic transition factors; non-SOE profitability declined following a similar time pattern, and non-SOEs are no better suited to withstand shocks such as the 1989–1990 economic downturn.     

中国产业政策对产能过剩的治理效应及机制研究

改革开放以来,中国制造业快速发展的同时出现了不可忽略的产能过剩问题,已有文献多从"市场失灵"或"政府失灵"上寻找原因,亦有学者将研究视角转向产业政策,但从产业政策层面展开的研究未能得到一致的结论。文章利用我国2001-2015年分省份制造业行业的面板数据实证检验产业政策对产能过剩的影响关系。结果表明：产业政策在平均意义上提高了制造业的产能利用率,显著缓解了产能过剩。进一步证实了产业政策确实与产能过剩相关联的常见特征有显著关系,产业政策提高了产出规模、产销比和利润产出比,同时降低了投入产出比。文章进一步研究了地方政府压力对制造业产能利用水平的影响效应。地方政府财政压力、经济增长压力和官员晋升压力不仅引致了产能过剩,而且削弱了产业政策对产能过剩的治理效果。文章的研究增进了人们对政府行为、产业政策和产能过剩三者内在关系的理解。     

ECONOMIC LIBERALIZATION AND CHANGES IN CORPORATE CONTROL IN LATIN AMERICA

This article analyzes ownership restructuring and changes in corporate control in four large Latin American countries—Argentina, Brazil, Chile, and Mexico—during the 1990s. Drawing on original firm‐level data, this is a comparative study aimed at identifying cross‐country differences and regularities. It focuses on transactions associated with privatizations and private mergers and acquisitions (M&As)—their evolution, relative importance, and sectoral incidence—as well as the role played by different types of investors: local, foreign, and joint ventures. A specially built database was used in the analysis, comprising 3,085 private M&As and 329 privatization transactions. Although similar to processes occurring elsewhere, it is argued that ownership restructuring in Latin America was facilitated and fostered by specific changes in policy‐associated institutional framework conditions. That is, the wide‐ranging process of ownership restructuring is strongly associated with economic liberalization, which has become the main feature of Latin American national regimes of incentives and regulation.     

Remote markets as shelters for local distortions: Evidence from China

We study how the presence of state-owned enterprises (SOEs) distorts private firms' decision on interprovincial sales in China. Using data from World Bank Investment Climate Survey and Annual Survey of Manufacturing Firms in China, we find evidence that the prevalence of SOEs in a city-industry where private firms reside will affect these firms' decision on the allocation of sales between interprovincial markets versus adjacent market. The direction of the effect on private firms, however, depends crucially on the private firms' access to credit. Specifically, the prevalence of SOEs leads to a higher propensity to sell to remote markets for firms with adequate financial access, whereas the opposite is true for firms who are credit constrained. We build a parsimonious model which links political/market distortion, market access, and credit constraint to explain these patterns, and argue that remote markets can serve as shelters for local distortions resulted from SOEs presence for some private firms.     

民营经济高质量发展政策现状与对策建议

民营经济高质量发展需培育强大的抗风险能力、创新能力和市场竞争力,坚持绿色发展。目前关于民营经济的政策主要集中于营造公平竞争环境、加大税费减免优惠、拓宽融资渠道、加强人才和技术支持。在梳理政策文本的基础上将现有政策分为4类：环境营造类政策是民营经济生存的基础;要素支持类政策是民营经济发展的动力;转型升级类政策是民营经济兴旺的支点;动力培育类政策是民营经济健康发展的内在牵引力。对接政策供给与需求后发现,当前政策还存在约束性不足、对长期目标关注不够、对市场机制强调不明显、纵向衔接不强等问题。为更好推动民营经济高质量发展,需支持和规范并举,把握市场规律,立足长远目标,同时用发展的眼光看待问题。     

基于新兴产业演化的投资价值发现

寻找投资的“机会之窗”,是新兴产业投资者的关键决策。通过剖析产业链成长现象,阐明了产业纵向演化中发生成长性迁移的内在机制。在将横向演化纳入纵向演化进行综合研究的过程中,总结了新兴产业演化的四种基本类型：横向竞争共存、横向转轨分化、纵向延伸突破和纵向反馈激活。揭示了投资的“机会之窗”即存在于四种类型的转变过渡之中,投资方向、方式和时机的决策逻辑须符合这一基本规律,才能推动新兴产业投资回报的实现。     

Economic rents, the distribution of gains from mineral exploitation, and mineral development policy

The ‘once-and-for-all’ character of mineral exploitation introduces a unique element into the analysis of mining and the formulation of mineral policy, making issues of mineral ownership, questions of the interests of producers and consumers, and of the timing of exploitation particularly important. Developing countries account for a considerable, though by no means dominant, proportion of the world's mineral output, but the bulk of consumption is in high-income industrialized countries, and these countries also own the major corporations with mineral exploitation expertise. The high degree of horizontal and vertical integration among these corporations, and their participation in mineral processing, is a further complication. This paper argues that the resource rents inherent in mineral exploitation, and the other monopolistic rents associated with mining and processing, are essential to an understanding of past trends and to the formulation of future policies. The difficulties of measuring these rents adds to the problems of determining their equitable distribution among mineral-rich countries, mineral exploitation companies and mineral consumers. The proper timing of mineral exploitation in relation to national economic development is a further complication. It is thus perhaps not surprising that in high-income, no less than in developing countries, mineral exploitation and use policies are in disarray. The paper concludes with a discussion of the principal mineral development policy options emerging from the debate on the distribution of gains from mining.