Effects of foreign acquisitions on financial constraints, productivity and investment in R&D of target firms in China

Yuhuilin  Chen; Xiuping Hua; Agyenim Boateng

doi:10.1016/j.ibusrev.2016.12.005

Effects of foreign acquisitions on financial constraints, productivity and investment in R&D of target firms in China

Yuhuilin Chen, Xiuping Hua, Agyenim Boateng^*

^*Corresponding author for this work

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Abstract

This paper examines whether foreign acquisitions lessen financial constraints, improve investment in research & development (R&D) and productivity of the target firms in China based on a sample of 914 cross-border mergers and acquisitions (CBM&A) over the period of 1994-2011. Using investment to cash-flow sensitivity to measure financial constraints, we find that foreign acquisitions in China are associated with a reduction of target firms’ financial constraints, irrespective of the ownership type of the target firm. However, the extent of financial constraint reduction is pronounced for non-SOEs compared to state-owned enterprises (SOEs). This study also provides evidence that foreign acquisitions improve Chinese target firms’ productivity and investment in R&D.

Original language	English
Pages (from-to)	640-651
Number of pages	12
Journal	International Business Review
Volume	26
Issue number	4
Early online date	16 Dec 2016
DOIs	https://doi.org/10.1016/j.ibusrev.2016.12.005
Publication status	Published - Aug 2017

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Keywords

acquisitions
financial constraints
investment funds

Cite this

Chen, Y., Hua, X., & Boateng, A. (2017). Effects of foreign acquisitions on financial constraints, productivity and investment in R&D of target firms in China. International Business Review, 26(4), 640-651. https://doi.org/10.1016/j.ibusrev.2016.12.005

@article{29da84af09144fd0968afe6bcae6729c,

title = "Effects of foreign acquisitions on financial constraints, productivity and investment in R&D of target firms in China",

abstract = "This paper examines whether foreign acquisitions lessen financial constraints, improve investment in research & development (R&D) and productivity of the target firms in China based on a sample of 914 cross-border mergers and acquisitions (CBM&A) over the period of 1994-2011. Using investment to cash-flow sensitivity to measure financial constraints, we find that foreign acquisitions in China are associated with a reduction of target firms{\textquoteright} financial constraints, irrespective of the ownership type of the target firm. However, the extent of financial constraint reduction is pronounced for non-SOEs compared to state-owned enterprises (SOEs). This study also provides evidence that foreign acquisitions improve Chinese target firms{\textquoteright} productivity and investment in R&D.",

keywords = "acquisitions, financial constraints, investment funds",

author = "Yuhuilin Chen and Xiuping Hua and Agyenim Boateng",

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N2 - This paper examines whether foreign acquisitions lessen financial constraints, improve investment in research & development (R&D) and productivity of the target firms in China based on a sample of 914 cross-border mergers and acquisitions (CBM&A) over the period of 1994-2011. Using investment to cash-flow sensitivity to measure financial constraints, we find that foreign acquisitions in China are associated with a reduction of target firms’ financial constraints, irrespective of the ownership type of the target firm. However, the extent of financial constraint reduction is pronounced for non-SOEs compared to state-owned enterprises (SOEs). This study also provides evidence that foreign acquisitions improve Chinese target firms’ productivity and investment in R&D.

AB - This paper examines whether foreign acquisitions lessen financial constraints, improve investment in research & development (R&D) and productivity of the target firms in China based on a sample of 914 cross-border mergers and acquisitions (CBM&A) over the period of 1994-2011. Using investment to cash-flow sensitivity to measure financial constraints, we find that foreign acquisitions in China are associated with a reduction of target firms’ financial constraints, irrespective of the ownership type of the target firm. However, the extent of financial constraint reduction is pronounced for non-SOEs compared to state-owned enterprises (SOEs). This study also provides evidence that foreign acquisitions improve Chinese target firms’ productivity and investment in R&D.

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KW - financial constraints

KW - investment funds

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DO - 10.1016/j.ibusrev.2016.12.005

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Documents and Links

10.1016/j.ibusrev.2016.12.005

Chen, Y. et al (2017) International Business Review article
This is the author final version of the article originally published in: International Business Review on 16 December 2016 by Elsevier. The final publisher version of this article is available at: http://dx.doi.org/10.1016/j.ibusrev.2016.12.005 © 2016. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Accepted author manuscript, 1.89 MBLicence: CC BY-NC-ND