Private Benefits of Managerial Control, Government Ownership, and Acquirer Returns: Evidence from the Chinese State-Controlled Listed Companies

Authors


  • Support for this research from Social Sciences Fund provided by Ministry of Education (09YJA790162) is gratefully acknowledged. We thank two anonymous referees and an editor for very helpful comments and suggestions. We are also grateful for valuable research assistance from Haixing Guo and Alec Li. Of course, all remaining errors and shortcomings are solely our responsibility.

Shuangyan Li, Assistant Professor, School of Economics and Finance, Xi'an Jiaotong University, Xi'an, 710061, P.R. China. Email: youzi323@126.com.

Abstract

This article examines how government ownership affects the relationship between private benefits of managerial control, measured as excessive overhead expenses, and profitability of acquirers. A total of 246 merger and acquisition (M&A) events from Chinese state-controlled listed companies (CSCLCs) between 2001 and 2006 constitutes the analytical sample. Under a low level of government shareholding, private benefits of managerial control positively correlated with acquirer announcement returns. However, there was no relationship between private benefits of managerial control and acquirer announcement returns under a high level of government shareholding. The implications of these findings for scholarship and practice are discussed. Copyright © 2011 ASAC. Published by John Wiley & Sons, Ltd.

Résumé

Cet article examine comment la propriété de l'État influence la relation entre les bénéfices privés du contrôle de gestion, évalués en frais généraux excessifs, et la rentabilité des acquéreurs. L'échantillon analytique est constitué d'un total de 246 évènements de fusions et d'acquisitions (M&A) d'entreprises étatiques chinoises cotées en bourse (CSCLCs) de 2001 à 2006. Les résultats empiriques démontrent que lorsque le niveau de participation du gouvernement est bas, les bénéfices privés du contrôle de gestion sont positivement corrélés aux retours d'annonce des acquéreurs. Mais lorsque le niveau de participation du gouvernement est élevé, il n'y a aucune relation entre les bénéfices privés du contrôle de gestion et les retours d'annonce des acquéreurs. Copyright © 2011 ASAC. Published by John Wiley & Sons, Ltd.

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