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Do Cross-border Mergers and Acquisitions by Chinese Firms Create Value?——Theoretical Framework and Empirical Analysis
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TitleDo Cross-border Mergers and Acquisitions by Chinese Firms Create Value?——Theoretical Framework and Empirical Analysis  
AuthorMa Xiaobai and Wu Changqi  
OrganizationGuanghua School of Management, Peking University; 
Key WordsCross-border Mergers and Acquisitions; Firm Performance; China 
Abstract With the rapid growth of Chinese economy, Chinese MNEs have increasingly participated in cross-border mergers and acquisitions (M&As). This phenomenon has raised great attention in the media, but our understanding of whether and why this mode of international expansion creates value to acquirer firm is limited. Using a unique and manually-constructed firm-level dataset, we examine multiple performance measures of 361 cross-border M&As by Chinese MNEs listed on Shanghai, Shenzhen, Hong Kong and New York Stock Exchanges during the sample period 1996-2013. We argue that cross-border acquisitions facilitate internalization of strategic assets that are both difficult to trade through domestic market and take time to develop internally, thus gaining positive stock market reactions. Our empirical findings confirm positive cumulative abnormal returns on average and suggest that market investors react positively to the presence of prior cross-border acquisition experience and developed target countries. However, to realize the synergy after acquisitions, Chinese MNEs need to actively manage the interdependencies between different business lines, which, in turn, increase the coordination costs. The results show that cross-border acquisitions indeed lead to significant negative accounting performance. Furthermore, there is a positive impact on the accounting performance if the acquiring firm is state-owned. We also find that cultural distance between China and the host country negatively affect the accounting performance. 
Serial NumberWP882 
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