Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-23T20:22:57.893Z Has data issue: false hasContentIssue false
  • English
  • Français

Commentary on the Enigma of Chinese Performance: Do Chinese Investors’ Reactions to Merger Announcements Accurately Reflect Prospects for Success?

Published online by Cambridge University Press:  24 June 2016

Michael N. Young
Michael N. Young*
Affiliation:
Hong Kong Baptist University, Hong Kong
*
Corresponding author: Michael N. Young ([email protected])
Get access Rights & Permissions [Opens in a new window]

Extract

Although McCarthy, Dolfsma, and Weitzel (2016) cover much ground in their study, in this commentary I focus on alternative explanations for the empirical results indicating that Chinese acquirers outperformed acquirers from other countries – particularly acquirers from the United States. First, based on research I have done with colleagues (e.g., Chen & Young, 2010; Young & McGuinness, 2001) and that of a doctoral student (Tang, 2016), I suggest that comparison of Chinese stock market reactions to merger announcements with stock market reactions to merger announcements from more mature markets, such as the United States, may create some misleading results. The Event Study Method (ESM) used in this study is a measure of investors’ short-term reactions to unanticipated events and it assumes that investors are capable of accurately evaluating such events (MacKinlay, 1997; McWilliams & Siegel, 1997). I suggest that, given the relative newness of Chinese stock markets, Chinese investors may have reacted more positively to merger announcements regardless of the mergers’ prospects for success. Second, similar to Shapiro and Li (2016), I suggest that stages of industry and organizational development better explain the actual motivation and success of Chinese acquirers than does a general theory of culture or corporate governance traditions.

Type
Commentaries
Information
Management and Organization Review , Volume 12 , Issue 2 , June 2016 , pp. 249 - 257
Copyright
Copyright © The International Association for Chinese Management Research 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Chen, Y. Y., & Young, M. N. 2010. Cross-border mergers and acquisitions by Chinese listed companies: A principal-principal perspective. Asia Pacific Journal of Management, 27: 523–539.Google Scholar
Deng, P. 2009. Why do Chinese firms tend to acquire strategic assets in international expansion? Journal of World Business, 44 (1): 74–84.Google Scholar
Du, J., & Yong, Z. 1998. Unchaining China's SOEs: Interviews with ten leading economists on SOE reform. Harvard China Review, 1 (1): 1–12.Google Scholar
Haleblian, J., Devers, C., McNamar, G., Carpenter, M., & Davison, R. 2009. Taking stock of what we know about mergers and acquisitions: A review and research agenda. Journal of Management, 35 (1): 469–502.Google Scholar
Kock, C. J. 2005. When the market misleads: Stock prices, firm behavior, and industry evolution. Organization Science, 16 (6): 637–660.Google Scholar
Lease, R. C., Masulis, R. W., & Page, J. R. 1991. An investigation of market microstructure impacts on event study returns. The Journal of Finance, 46 (4): 1523–1536.Google Scholar
Luo, Y. D., & Tung, R. L. 2007. International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38 (4): 481–498.Google Scholar
MacKinlay, A. C. 1997. Event studies in economics and finance. Journal of Economic Literature, 25: 13–39.Google Scholar
McCarthy, K. J., Dolfsma, W., & Weitzel, U. 2016. The first global merger wave and the enigma of Chinese performance. Management and Organization Review, 12 (2): 221--248.CrossRefGoogle Scholar
McGuiness, P. B., Lee, J., Wong, V., Cheung, K., & Yan, Y. 2000. Market segmentation in the pricing of different categories of stock in Mainland-incorporated Companies. HK SFC Bulletin, July–September, pp. 1–18.Google Scholar
McWilliams, A., & Siegel, D. 1997. Event studies in management research: Theoretical and empirical issues. Academy of Management Journal, 40 (3): 626–657.Google Scholar
Meyer, K. E. 2015. Context in management research in emerging economies. Management and Organization Review, 11 (3): 369–377.Google Scholar
Morck, R., Yeung, B., & Yu, W. 2000. The information content on stock markets: Why do emerging markets have synchronous stock price movements? Journal of Financial Economics, 58 (1–2): 215–260.Google Scholar
Park, N. K. 2004. A guide to using event study methods in multi-country settings. Strategic Management Journal, 25 (7): 655.Google Scholar
Rui, H. C., & Yip, G. S. 2008. Foreign acquisitions by Chinese firms: A strategic intent perspective. Journal of World Business, 43 (2): 213–226.Google Scholar
SCMP. 2015. Three big failures sent China's stock market on a crash course. South China Morning Post, Nov 21, 2015. [Cited 25 November 2015.] Available from URL: http://www.scmp.com/news/china/policies-politics/article/1881301/three-big-failures-sent-chinas-stock-market-crash . Google Scholar
Scharfstein, D. S., & Stein, J. C. 1990. Herd behavior and investment. American Economic Review, 80 (3): 465–479.Google Scholar
Shapiro, D., & Li, J. 2016. The first global merger wave and the enigma of Chinese performance: Commentary. Management and Organization Review, 12 (2): 259–267.Google Scholar
Steinfeld, E. S. 1998. Forging reform in China: The fate of state-owned industry. Cambridge: Cambridge University Press.Google Scholar
Tang, A. Y. Y. 2016. Can neglected firm effect help explain the outperformance of HK-listed mainland companies? Unpublished Doctoral Dissertation. Hong Kong Baptist University.Google Scholar
Tonello, M., & Rabimov, S. R. 2010. Institutional investment report: Trends in asset allocation and portfolio composition. The Conference Board, Report No. R-1468-10-RR.Google Scholar
Walter, C. E., & Howie, F. J. T. 2011. Red Capitalism: The fragile financial foundations of China's extraordinary rise. Singapore: John Wiley & Sons (Asia) Pte Ltd. Google Scholar
Walter, C. E., & Howie, F. J. T. 2003. Privatizing China: The stock markets and their role in corporate reform. Singapore: John Wiley & Sons (Asia) Pte Ltd. Google Scholar
Young, M. N., & McGuinness, P. B. 2001. The missing link: Why stock markets have been ineffective in Chinese SOE reform. Business Horizons, 44 (4): 55–62.Google Scholar