Ownership Type, Home‐Country Government‐Directed Investment Policies and Firm Value in Strategic Sectors: Evidence from Chinese Acquiring Firms

Boateng, Agyenim; Du, Min; Bi, XiaoGang; Kwabi, Frank O.; Glaister, Keith W.

Abstract

Using data of Chinese acquirers in strategic sectors, we assess the role of home government and the effects of the interaction between ownership type and government-directed investment policies on acquiring firm value in cross-border acquisitions (CBAs). We find that CBA activities in strategic sectors encouraged by the home-country government through its investment policies experience significant increase in acquiring firm value. We also find that firms investing in government-designated strategic sectors generate wealth for acquirers, but contrary to efficiency logic rooted in agency theory, state-owned enterprises appear to outperform private-owned enterprises. Further analysis indicates that three financial incentives associated with government-directed policies – namely, interest-rate reduction, tax incentives and direct subsidies – constitute sources of firm value. Our results raise several policy implications, including the need for transparent and rule-based policies and governance systems to be developed and implemented by governments in the home and host countries to regulate state-supported firms investing in sensitive strategic sectors.

• Journal Article Type: Article
• Acceptance Date: Jun 11, 2021
• Online Publication Date: Jul 1, 2021
• Publication Date: 2022-07
• Deposit Date: Nov 18, 2021
• Publicly Available Date: Nov 19, 2021
• Journal: British Journal of Management
• Print ISSN: 1045-3172
• Electronic ISSN: 1467-8551
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 33
• Issue: 3
• Pages: 1412-1431
• DOI: https://doi.org/10.1111/1467-8551.12538
• Public URL: http://researchrepository.napier.ac.uk/Output/2822799