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

Research output: Chapter in Book/Report/Conference proceedingConference proceeding

Abstract

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 Sep 201510 Sep 2015
Conference number: 29
https://www.bam.ac.uk/civicrm/event/info?id=2886
http://conference.bam.ac.uk/BAM2015/htdocs/index.php
https://www.bam.ac.uk/civicrm/event

Conference

ConferenceBritish Academy of Management Conference 2015
Abbreviated titleBAM2015 Conference
CountryUnited Kingdom
CityPortsmouth
Period8/09/1510/09/15
Internet address

Fingerprint

Mergers and acquisitions
Market performance
Cash
Financial markets
China
Financial decisions
Finance
Market reaction
Debt
Bidding
Chinese firms
Specific factors
Corporate control
Financing
Ownership structure
Dilution
Financing decisions
Voting power
Threat
Financial condition

Keywords

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

Cite this

Muganhu, C., & Liu, J. (2015). Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions. In BAM 29th Annual Conference: The value of pluralism in advancing management research, education and practice, Univeristy of Portsmouth, 8-10 September 2015 British Academy of Management.

Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions. / Muganhu, Christopher; Liu, Jia.

BAM 29th Annual Conference: The value of pluralism in advancing management research, education and practice, Univeristy of Portsmouth, 8-10 September 2015. British Academy of Management, 2015.

Research output: Chapter in Book/Report/Conference proceedingConference proceeding

Muganhu, C & Liu, J 2015, Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions. in BAM 29th Annual Conference: The value of pluralism in advancing management research, education and practice, Univeristy of Portsmouth, 8-10 September 2015. British Academy of Management, British Academy of Management Conference 2015, Portsmouth, United Kingdom, 8/09/15.
Muganhu C, Liu J. Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions. In BAM 29th Annual Conference: The value of pluralism in advancing management research, education and practice, Univeristy of Portsmouth, 8-10 September 2015. British Academy of Management. 2015
Muganhu, Christopher ; Liu, Jia. / Financial decisions and market performance: An analysis of China's domestic mergers and acquisitions. BAM 29th Annual Conference: The value of pluralism in advancing management research, education and practice, Univeristy of Portsmouth, 8-10 September 2015. British Academy of Management, 2015.
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