Acknowledgments: An earmarked research grant (CUHK4112/04H) from the Research Grants Council of the Hong Kong Government is gratefully acknowledged. We thank Xi Li, Kun Li and Yong Yang for their research assistance.
Post-Takeover Financing Activities under Financial Repression: Evidence from China*
Article first published online: 20 JUN 2012
© 2012 Korean Securities Association
Asia-Pacific Journal of Financial Studies
Special Issue: Special Issue on Corporate Governance in Emerging Markets
Volume 41, Issue 3, pages 313–346, June 2012
How to Cite
Du, J., Rui, O. M. and Wong, S. M. L. (2012), Post-Takeover Financing Activities under Financial Repression: Evidence from China. Asia-Pacific Journal of Financial Studies, 41: 313–346. doi: 10.1111/j.2041-6156.2012.01075.x
- Issue published online: 20 JUN 2012
- Article first published online: 20 JUN 2012
- Received 31 August 2011; Accepted 11 January 2012
- Financial repression;
In China’s state-dominated financial system, many firms, especially non-state-owned or private organizations, face serious restrictions in gaining access to bank and equity market financing. This kind of highly discriminatory financial repression policy has induced some unique post-takeover financing activities, which are consistent with the desire to acquire firms in order to capitalize on their privileges in getting access to external finance. Specifically, takeovers by acquirers facing more serious financing obstacles (private acquirers) tend to show less salient symptoms of tunneling and display patterns of more efficient investment than takeovers by acquirers suffering less serious financing obstacles (state acquirers). Market reaction analysis suggests that these takeovers pose different implications for acquirers’ shareholder value, with takeovers by private acquirers being viewed as value enhancing but takeovers by state acquirers being viewed as value reducing.