Effects of foreign acquisitions on financial constraints, productivity and investment in R&D of target firms in China

Yuhuilin Chen, Xiuping Hua, Agyenim Boateng

Research output: Journal PublicationArticlepeer-review

31 Citations (Scopus)

Abstract

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
Volume26
Issue number4
DOIs
Publication statusPublished - Aug 2017

Keywords

  • Cross-border mergers and acquisitions
  • Financial constrains
  • Productivity
  • R&D investment, China

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Marketing

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