State ownership, prior experience and performance: a comparative analysis of Chinese domestic and cross-border acquisitions

Du, Min; Kwabi, Frank; Yang, Tianle

Abstract

Purpose
Drawing on three theoretical frameworks, this paper aims to examine the effects of state-owned enterprises (SOEs) and the interaction between SOEs and prior acquisition experience of Chinese domestic and cross-border acquirers.

Design/methodology/approach
Using a sample of 4,116 firms consisting of 3,939 domestic mergers and acquisitions (M&As) and 177 cross-border M&As over the period 2004–2017, this study adopts both accounting- and market-based performance measures, namely, return on assets, return on equity and buy-and-hold abnormal return to analyse the effects of SOEs and the interaction between SOEs and prior acquisition experience on acquirers’ performance.

Findings
First, this paper finds SOEs to exert a positive influence on acquirer performance, contrary to agency theory but in line with the resource-based view. However, the positive relationship between SOEs and performance appears more pronounced for domestic M&A compared to cross-border M&As. Second, this study also finds prior acquisition experience and the combined effect of SOE and prior acquisition experience to have a positive and significant bearing on performance.

Research limitations/implications
The limitation of this study is the lack of cross-border M&A data with all the relevant information compared to domestic M&A. Thus, the cross-border M&A sample appears lower compared to the domestic M&A sample.

Practical implications
The results imply that the moderating role of prior acquisition experience on the relationship between SOEs and performance appears to be crucial for cross-border M&A performance compared to domestic M&A.

Originality/value
The findings of this study show SOEs increase performance, contrary to the widely held view based on agency theory that SOEs are inefficient.

Citation

Du, M., Kwabi, F., & Yang, T. (2021). State ownership, prior experience and performance: a comparative analysis of Chinese domestic and cross-border acquisitions. International Journal of Accounting and Information Management, 29(3), 472-491. https://doi.org/10.1108/ijaim-01-2021-0027

• Journal Article Type: Article
• Acceptance Date: Jul 1, 2021
• Online Publication Date: Jul 16, 2021
• Publication Date: Aug 3, 2021
• Deposit Date: Dec 10, 2021
• Journal: International Journal of Accounting & Information Management
• Print ISSN: 1834-7649
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 29
• Issue: 3
• Pages: 472-491
• DOI: https://doi.org/10.1108/ijaim-01-2021-0027
• Public URL: http://researchrepository.napier.ac.uk/Output/2828571