Title: Wealth impact of cross-border US acquisitions of Chinese firms

Authors: Halil Kiymaz, Ilan Alon

Addresses: Crummer Graduate School of Business, Rollins College, 1000 Holt Avenue, Winter Park, FL 32789, USA. ' The China Center, Rollins College, 1000 Holt Ave, Winter Park, FL 32789, USA

Abstract: Do US firms gain value by buying Chinese firms? This study investigates the wealth impact of mergers and acquisitions| announcements on US firms involved in cross-border acquisitions of 204 Chinese firms from 1999 to 2007. The empirical findings show that US firms experienced statistically significant wealth gains on the announcement day, though they are primarily concentrated in transactions involving divested targets. An analysis of wealth gains with respect to industry affiliation indicates that acquisitions in the Chinese manufacturing and services sectors experience the greatest wealth gains. In contrast, acquisitions in the financial sector result in a loss of wealth. Among the factors influencing wealth gains were the undervaluation of the yuan, favourable Chinese economic conditions, positive sales growth rates and financial slack of the acquiring firms.

Keywords: international M&A; mergers and acquisitions; USA; United States; event study; cross-border acquisitions; financial sector; manufacturing sector; service sector; wealth creation; acquirer sales growth rate; Chinese firms; China; value creation.

DOI: 10.1504/EJIM.2011.040914

European Journal of International Management, 2011 Vol.5 No.4, pp.432 - 451

Published online: 26 Jun 2011 *

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