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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    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 languageEnglish
    Pages (from-to)640-651
    Number of pages12
    JournalInternational Business Review
    Issue number4
    Early online date16 Dec 2016
    Publication statusPublished - Aug 2017



    • acquisitions
    • financial constraints
    • investment funds

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