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Corporate Ownership, Political Connections and M&A: Empirical Evidence from China

Author

Listed:
  • Ningyue Liu

    (School of Management and Economicsv Beijing Institute of Technology)

  • Liming Wang

    (School of Economics and Management, Beijing University of Technology and Irish Institute for Chinese Studies, University College Dublin)

  • Min Zhang

    (School of Business, Renmin University of China)

Abstract

This paper examines the impact of political connections on corporate mergers and acquisitions (M&As) behavior using data from companies listed in Chinese equity markets during the period 1998 to 2010. Our empirical results indicate that firms with political connections have a greater probability of engaging in M&As and tend to engage in larger-scale M&As. The impact of political connections on corporate M&As is mainly realized via government intervention in state-owned enterprises (SOEs). The paper also investigates the impact of political connections on M&A performance, demonstrating a significantly negative impact when SOEs are involved but a significantly positive impact when non-SOEs are involved. The findings of this paper suggest that the political connections of Chinese listed firms have a strong influence on M&A activities and performance. © 2013 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Ningyue Liu & Liming Wang & Min Zhang, 2013. "Corporate Ownership, Political Connections and M&A: Empirical Evidence from China," Asian Economic Papers, MIT Press, vol. 12(3), pages 41-57, Fall.
    • Handle: RePEc:tpr:asiaec:v:12:y:2013:i:3:p:41-57
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    Citations

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    Cited by:

    1. Wang, Delu & Ma, Gang & Song, Xuefeng & Liu, Yun, 2016. "Political connection and business transformation in family firms: Evidence from China," Journal of Family Business Strategy, Elsevier, vol. 7(2), pages 117-130.
    2. da Silva, Fernando Moreira & Ferreira, Manuel Portugal & Serra, Fernando Ribeiro & Pinto, Cláudia Frias, 2019. "Government attenuation of institutional inefficiencies in capital markets: influence on the financial performance of Brazilian electricity distribution companies," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    3. Chen, Chien-Hsun, 2023. "The Emergence of China’s Mergers and Acquisitions Market," MPRA Paper 116615, University Library of Munich, Germany.
    4. Bai, Tao & Chen, Stephen & Xu, Youzong, 2021. "Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China," International Business Review, Elsevier, vol. 30(5).
    5. Shen, Guangjun & Chen, Binkai, 2017. "Zombie firms and over-capacity in Chinese manufacturing," China Economic Review, Elsevier, vol. 44(C), pages 327-342.
    6. Jian, Jianhui & Li, Huaqian & Meng, Leah & Zhao, Chunxiang, 2020. "Do policy burdens induce excessive managerial perks? Evidence from China’s stated-owned enterprises," Economic Modelling, Elsevier, vol. 90(C), pages 54-65.
    7. Myznikava, Katsiaryna (Katherine) & Farinha, Jorge, 2023. "The impact of political freedoms on cross-border M&A abandonment likelihood," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 112-138.

    More about this item

    Keywords

    political connection; corporate ownership; corporate M&A; firm behavior and performance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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