Why Are Chinese MNES Not Financially Competitive in Cross-border Acquisitions? The Role of State Ownership

Wenxin Guo, Joseph A. Clougherty, Tomaso Duso

Research output: Contribution to journalArticle

Abstract

While MNEs from emerging markets — and China in particular — tend to pay high acquisition premiums when they engage in cross-border acquisition activity, the determinants of this overbidding are not completely understood. We argue that state ownership is a key factor in explaining the high acquisition premiums paid by emerging-market multinationals. Employing data on 450 Chinese outward cross-border acquisitions over the 1990–2011 period, we find that Chinese state-owned MNEs pay higher acquisition premiums than do non-state-owned MNEs, that this is particularly the case for target firms based in developed-nations, and that state-owned MNEs pay even higher acquisition premiums when they act as parents and employ a privately-owned subsidiary to complete the cross-border acquisition.

Original languageEnglish (US)
Pages (from-to)614-631
Number of pages18
JournalLong Range Planning
Volume49
Issue number5
DOIs
StatePublished - Oct 1 2016

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Finance
  • Strategy and Management

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