Performance Of Cross-Border Mergers And Acquisitions By Chinese Listed Firms And Its Determinants

With the rapid development of its domestic economy, China has seen its crossborder M&A activities (CBM&A) booming in recent years. However, because mostCBM&A deals undertaken by Chinese acquirers took place after the2007financial crisis,there have been few studies in this area.This thesis collects a sample of Chinese-listed-companies-initiated CBM&A dealswhose announcement date spans the period from2000to2012. Based on thiscomprehensive sample, this thesis uses both cumulative abnormal return (CAR) as ameasurement of CBM&A performance and event study to answer two research questions:1) whether CBM&A deals have created or destroyed wealth for the acquiring firmshareholders;2) What are the determinants of CBM&A performance.For the first research question, the empirical result provides evidence that CAR ispositive and statistically significant in multiple event windows surrounding theannouncement day and CAR peaks at the announcement day, which indicates informationleakage. However, after we take both CAR and the acquiring firm pre-announcementmarket cap into consideration, it seems that CBM&A have been value destroying andlarger cap bidder firms tend to lose while smaller cap bidder firms tend to win.For the second research question, the empirical results provide evidence that CAR ispositively related to acquirer’s leverage, short-term liability to asset ratio, ROE andnegatively related to its current/quick ratio and free cash flow. This finding suggest thatthe disciplinary role of debt, especially short-term liability, can effectively mitigate theagency problem as scheduled interest and principal repayment will force managers to bemore prudent in undertaking major capital investments such as CBM&A.