Ownership Type, Home-Country Government-Directed Investment Policies and Firm Value in Strategic Sectors: Evidence from Chinese Acquiring Firms

Agyenim Boateng, Min Du, Xiao Gang Bi, Frank O. Kwabi, Keith W. Glaister

Research output: Journal PublicationArticlepeer-review

2 Citations (Scopus)

Abstract

Using data of Chinese acquirers in strategic sectors, we assess the role of home government and the effects of the interaction between ownership type and government-directed investment policies on acquiring firm value in cross-border acquisitions (CBAs). We find that CBA activities in strategic sectors encouraged by the home-country government through its investment policies experience significant increase in acquiring firm value. We also find that firms investing in government-designated strategic sectors generate wealth for acquirers, but contrary to efficiency logic rooted in agency theory, state-owned enterprises appear to outperform private-owned enterprises. Further analysis indicates that three financial incentives associated with government-directed policies – namely, interest-rate reduction, tax incentives and direct subsidies – constitute sources of firm value. Our results raise several policy implications, including the need for transparent and rule-based policies and governance systems to be developed and implemented by governments in the home and host countries to regulate state-supported firms investing in sensitive strategic sectors.

Original languageEnglish
JournalBritish Journal of Management
Early online date1 Jul 2021
DOIs
Publication statusPublished Online - 1 Jul 2021

ASJC Scopus subject areas

  • Business, Management and Accounting (all)
  • Strategy and Management
  • Management of Technology and Innovation

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