Abstract
This paper explores the role of political connections in mergers and acquisitions (M&A) by examining the stock market performance in the short-run announcement period and the long-run post-merger period of Chinese M&A from 1998 to 2017. We further examine whether the corporate governance mechanisms and nature of ownership may determine the extent by which political connections may impact on M&A outcome. The results show that political connection has a positive and significant impact on firm performance for both privately-owned enterprises (POEs) and state-owned enterprises (SOEs). The results are more pronounced in the presence of strong corporate governance mechanisms: board independence and board gender diversity. We also find that the effect of political connection on post-merger performance is higher for POEs in comparison to SOEs. Our results are robust across alternative measures of firm performance and alternative measures of political connection.
Original language | English |
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Pages (from-to) | 372-389 |
Number of pages | 18 |
Journal | International Review of Economics and Finance |
Volume | 85 |
Early online date | 8 Feb 2023 |
DOIs | |
Publication status | Published - May 2023 |
Keywords
- mergers
- network theory
- grabbing hand theory
- political connections
ASJC Scopus subject areas
- Economics and Econometrics
- Finance