• mergers and acquisitions;
  • China;
  • financial performance;
  • scarcity;
  • cross-border;
  • foreign direct investment;
  • multinational;
  • diversification


This paper examines whether foreign acquisition of Chinese firms improves share price performance relative to domestic acquisitions. The results show that foreign acquisitions are not associated with positive abnormal returns in the short-run, but that they are so associated for domestic acquisitions. Foreign acquisitions also realise significant long-run gains, especially when the acquiring firm is large. Specifically, we find that there is a significant, positive long-run outperformance of 29.81% for large foreign acquisitions benchmarked against domestic ones, while large foreign acquisitions earn 22.39% in aggregate. Our evidence suggests that large Chinese acquirers gain when they expand their operations abroad, consistent with the literature on reverse internalisation.