Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions

Christopher Muganhu, Jia Liu

Research output: Chapter in Book/Report/Conference proceedingConference proceedingpeer-review


We examine the financial decision and market valuation in mergers and acquisitions using a unique dataset of Chinese firms in the period of 2003–2010. Our results show that bidders’ financial decisions are related to factors specific to the bidders, targets and deals, ownership structure and financial conditions. State–controlled bidding firms are less likely to use cash proceeds from stock issuance to finance mergers and acquisitions, suggesting that they are more concerned with the threat of resulting corporate control change, while executives prefer cash from debt issuance to avoid dilution of voting power. Bidders with huge cash reserves are less likely to opt for any form of stock financing, which is consistent with the view that cash–rich bidders prefer internally generated funds to finance mergers and acquisitions. With regards to market performance, both cash and stock financed deals create value for bidding firms in the short–term, while stock deals perform better than cash deals in the long–term. Our further analyses show that market reactions differ in ways which suggest a difference in the market’s assessment over financing decision when the deals are paid in cash, with deals involving seasoned equity offerings outperforming those paid by internal funds and debt. Our results highlight that market reactions to M&A deals financed by different sources in China differ from those in well-developed economies due to its distinctive institutional setup.
Original languageEnglish
Title of host publicationBAM 29th Annual Conference
Subtitle of host publicationThe value of pluralism in advancing management research, education and practice, Univeristy of Portsmouth, 8-10 September 2015
PublisherBritish Academy of Management
ISBN (Print)978095460889
Publication statusPublished - 2015
EventBritish Academy of Management Conference 2015: The value of pluralism in advancing management research, education and practice - University of Portsmouth, Portsmouth, United Kingdom
Duration: 8 Sept 201510 Sept 2015
Conference number: 29


ConferenceBritish Academy of Management Conference 2015
Abbreviated titleBAM2015 Conference
Country/TerritoryUnited Kingdom
Internet address


  • mergers and acquisitions
  • payment decision
  • financing strategies
  • value creation
  • ownership structure in China


Dive into the research topics of 'Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions'. Together they form a unique fingerprint.

Cite this