The financing of Chinese outbound mergers and acquisitions: Is there a distortion between state-owned enterprises and privately owned enterprises?

摘要

This study offers novel theoretical and empirical insights into the financing of China's outbound mergers and acquisitions (M&As). We examine whether the financing of Chinese outbound M&As is distorted between state-owned enterprises (SOEs) and privately owned enterprises (POEs). We conduct an empirical study using a dataset of 224 outbound M&A deals. We find that SOEs enjoy a higher level of financing capacity in terms of debt and equity compared with POEs, although SOEs demonstrate lower stock performance, which implies that there are financing distortions in Chinese outbound M&As. Furthermore, we find that state ownership compensates for the poor M&A performance of SOEs through positively moderating the effect of debt financing, which leads to a "fictional" prosperity for SOEs. This result denies our theoretical prediction that builds on a Western theory concerning the disciplining function of debt financing on firm value; it provides evidence that the positive effect of debt financing in Chinese outbound M&As is derived from financing discrimination.