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Contribution Details

Type Master's Thesis
Scope Discipline-based scholarship
Title Do Cross Border M&A Create Value for Buyers? A Look into Chinese Cross Border Deals
Organization Unit
Authors
  • Cong Ren
Supervisors
  • Michel Habib
  • Diego Ostinelli
Language
  • English
Institution University of Zurich
Faculty Faculty of Business, Economics and Informatics
Number of Pages 23
Date 2017
Abstract Text This paper studies on company stock return performance of Chinese buyers engaged in cross border M&A, based on the 155 collected cross border deals during 2012.01-2016.12 conducted by Chinese companies listed in Shanghai, Shenzhen, Hong Kong, Singapore, New York, Nasdaq, and London stock exchange market. Study shows that, on whole scale, the cumulative average abnormal return for 155 stocks are positive and statistic significant, meaning cross border acquisition exerts positive and significant wealth effect on Chinese acquirers in terms of stock return. To be more specific, transactions in which buyer companies have smaller size, targets in similar culture area (greater China) with Chinese buyers, and no control gained on targets tend to exert significant positive effect on company stock returns during event window. For some large companies, study result shows that it is not beneficial for shareholders if their companies focus too much on oversea expanding strategy, because a series of oversea M&A is very consumable for buyers which could lead to various risk such as operation risk and financing risk, and increasing risk and uncertainty will damage company’s performance in stock market. Thus, big company should not to be overconfident while be more careful to control oversea expanding risk. On the other hand, for M&A transactions in different cultural area, Chinese buyers should pay attention to communication skill and efficiency in merger process, and treat cultural integration as their priority in post-merger integration Finally, control gained is not always a good signal in stock market, since gaining control from developing market companies normally do not bring good corporate system to targets. However, the gain on control usually means a large consideration payment, which lead to increasing financial burden, as well as more problems in post-acquisition integration.
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