State ownership, prior experience and performance: a comparative analysis of Chinese domestic and cross-border acquisitions

Abstract

Purpose

Drawing on three theoretical frameworks, this paper aims to examine the effects of state-owned enterprises (SOEs) and the interaction between SOEs and prior acquisition experience of Chinese domestic and cross-border acquirers.

Design/methodology/approach

Using a sample of 4,116 firms consisting of 3,939 domestic mergers and acquisitions (M&As) and 177 cross-border M&As over the period 2004–2017, this study adopts both accounting- and market-based performance measures, namely, return on assets, return on equity and buy-and-hold abnormal return to analyse the effects of SOEs and the interaction between SOEs and prior acquisition experience on acquirers’ performance.

Findings

First, this paper finds SOEs to exert a positive influence on acquirer performance, contrary to agency theory but in line with the resource-based view. However, the positive relationship between SOEs and performance appears more pronounced for domestic M&A compared to cross-border M&As. Second, this study also finds prior acquisition experience and the combined effect of SOE and prior acquisition experience to have a positive and significant bearing on performance.

Research limitations/implications

The limitation of this study is the lack of cross-border M&A data with all the relevant information compared to domestic M&A. Thus, the cross-border M&A sample appears lower compared to the domestic M&A sample.

Practical implications

The results imply that the moderating role of prior acquisition experience on the relationship between SOEs and performance appears to be crucial for cross-border M&A performance compared to domestic M&A.

Originality/value

The findings of this study show SOEs increase performance, contrary to the widely held view based on agency theory that SOEs are inefficient.

Citation

Du, M., Kwabi, F. and Yang, T. (2021), "State ownership, prior experience and performance: a comparative analysis of Chinese domestic and cross-border acquisitions", International Journal of Accounting & Information Management, Vol. 29 No. 3, pp. 472-491. https://doi.org/10.1108/IJAIM-01-2021-0027