Article ID Journal Published Year Pages File Type
6481251 Research in International Business and Finance 2017 12 Pages PDF
Abstract

This study offers novel theoretical and empirical insights into the financing of China's outbound mergers and acquisitions (M&As). We examine whether the financing of Chinese outbound M&As is distorted between state-owned enterprises (SOEs) and privately owned enterprises (POEs). We conduct an empirical study using a dataset of 224 outbound M&A deals. We find that SOEs enjoy a higher level of financing capacity in terms of debt and equity compared with POEs, although SOEs demonstrate lower stock performance, which implies that there are financing distortions in Chinese outbound M&As. Furthermore, we find that state ownership compensates for the poor M&A performance of SOEs through positively moderating the effect of debt financing, which leads to a “fictional” prosperity for SOEs. This result denies our theoretical prediction that builds on a Western theory concerning the disciplining function of debt financing on firm value; it provides evidence that the positive effect of debt financing in Chinese outbound M&As is derived from financing discrimination.

Graphical abstractDownload high-res image (76KB)Download full-size image

Keywords
Related Topics
Social Sciences and Humanities Business, Management and Accounting Business and International Management
Authors
, , ,