CHINA OUTBOUND INVESTMENTS – ACADEMIC RESEARCH

An Analysis of Short-Term Performance of UK Cross-Border Mergers and Acquisitions by Chinese Listed Companies

Abstract:      

Using a unique and proprietary database of Chinese cross-border mergers and acquisitions into the UK from 2012 to early 2016, this paper investigates the short-term performance of UK cross-border mergers and acquisitions acquired by Chinese publicly-listed companies. Using event study analysis with four different time-period windows, the results show that Chinese acquirers have earned significantly positive abnormal returns on the first day following the announcement date of M&A deals, however, these positive returns faded away over time. In addition, we conduct the event analysis by sector subsamples. The findings suggest that Chinese acquirers in Real Estate and other business sector deals have gained positive abnormal returns, while those in the Financial sector had negative abnormal returns. Regarding the factors that drive stock performance, the paper takes five of the most related deal characteristics into consideration both in univariate analysis and regression analysis. The results indicate that target form (public/private) and absolute transaction size are the most influential factors on the short-term performance of these Chinese acquiring firms: acquirers engaged in deals where the target firms are UK private and small/medium-sized earn statistically significant higher abnormal returns than those UK public and large-sized targets.

 

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Reports

Chinese Outbound Investments into US (2004-2012)

Co-Authors:
Petter N. Kolm, Corant Institute, New York University, and the Heimdall Group, LLC New York, United States Henry T. Tillman, Chairman and Chief Executive Officer, Grisons Peak LLP, London, United Kingdom (Views set forth in this document are the views of the authors and not necessarily of their respective institutions)

Overview

This study analyses Chinese outbound investment into the US since 2004, the year when the Chinese made their initial major acquisition of a US owned organisation. The empirical data is from 2004-2011 inclusive, and extends across M&A/equity investments as well as major Bank Loans and major Trade Agreements. The data has been assembled solely from public sources, and in many cases, from the Grisons Peak China Outbound database.

In this study, we posit that there are three distinctive stages of Chinese outbound investments into the US:

  • 2004-2006 – Initial Phase

  • 2007-2009 – Financial Services brands via Equity/Funds Investments

  • Post Financial Crisis – A Shift to Trade Agreements

SSRN Research Rankings:

As of August 2016, the China into US M&A research paper ranked in the top 9% of all SSRN research based upon total downloads. Author rankings was in the top 19%, again based on total downloads.