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.
- financial constraints
- investment funds
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