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How do political connections cause SOE s and non‐ SOE s to make different M&A decisions/performance? Evidence from China
Author(s) -
Liu Qigui,
Luo Tianpei,
Tian Gary Gang
Publication year - 2019
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/acfi.12302
Subject(s) - politics , china , mergers and acquisitions , business , government (linguistics) , value (mathematics) , local government , industrial organization , finance , political science , public administration , computer science , machine learning , linguistics , philosophy , law
This study examines the impact that political connections have on Mergers and Acquisitions (M&A) performance and the decisions of Chinese listed firms. We find that political connections destroy (create) value in SOE s (non‐ SOE s). Our findings show that connected SOE s are more likely to acquire local targets, especially when the local unemployment rate is high and when the firms are controlled by the local government, and they are less likely to conduct vertical mergers. M&A decisions of connected non‐ SOE s are less influenced by the government; instead, political connections in non‐ SOE s help bidders to integrate vertically and obtain external financing support.