Geographic proximity and M&As: Evidence from China |
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| Affiliation: | 1. School of Public Finance and Taxation, Southwestern University of Finance and Economics, China;2. Research Institute of Economics and Management, Southwestern University of Finance and Economics, China;1. Department of Accounting, Faculty of Economics and Social Sciences, Bu-Ali Sina University, Hamadan, Iran;2. Department of Management, Economics and Accounting, Payam Noor University (PNU), Iran;1. School of Management, Xi''an Jiaotong University, Xi''an, China;2. Fanhai International School of Finance, Fudan University, Shanghai, China;3. Lubin School of Business, Pace University, New York, USA;1. Department of Accounting, China Women''s University, No.1 Yuhui East Road, Chaoyang District, Beijing, 100101, China;2. Department of Finance, The University of Alabama, 200 Alston Hall, Tuscaloosa, AL 35487, United States of America;1. International Business School, Zhejiang Gongshang University, No.18 Xuezheng Street, Xiasha, Hangzhou 310018, China;2. School of Accounting, Zhongnan University of Economics and Law, 182# Nanhu Avenue, East Lake High-tech Development Zone, Wuhan 430073, China |
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| Abstract: | This paper investigates the impact of geographic proximity on mergers and acquisitions (M&As). In recent years, the Chinese government has invested heavily in high-speed railway (HSR) construction, which has greatly reduced the commuting time between connected cities and facilitated cross-city investments. Therefore, we exploit whether two cities were connected by an HSR as a quasi-natural experiment to identify the causal relationship between geographic proximity and M&As. We find that the number of M&As between two HSR-connected cities increases by 9.6% after adopting HSR service. Additional results show that HSRs have reduced the average time of completing M&A transactions by 29.4% and increased the subsequent economic performance of the acquirers. A mechanism analysis shows that HSRs promote M&As mainly by alleviating the information asymmetry between acquirers and targets and promoting monitoring on targets. |
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