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Commentary on the Enigma of Chinese Performance: Do Chinese Investors’ Reactions to Merger Announcements Accurately Reflect Prospects for Success?

Published online by Cambridge University Press:  24 June 2016

Michael N. Young
Michael N. Young*
Affiliation:
Hong Kong Baptist University, Hong Kong
*
Corresponding author: Michael N. Young ([email protected])
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Extract

Although McCarthy, Dolfsma, and Weitzel (2016) cover much ground in their study, in this commentary I focus on alternative explanations for the empirical results indicating that Chinese acquirers outperformed acquirers from other countries – particularly acquirers from the United States. First, based on research I have done with colleagues (e.g., Chen & Young, 2010; Young & McGuinness, 2001) and that of a doctoral student (Tang, 2016), I suggest that comparison of Chinese stock market reactions to merger announcements with stock market reactions to merger announcements from more mature markets, such as the United States, may create some misleading results. The Event Study Method (ESM) used in this study is a measure of investors’ short-term reactions to unanticipated events and it assumes that investors are capable of accurately evaluating such events (MacKinlay, 1997; McWilliams & Siegel, 1997). I suggest that, given the relative newness of Chinese stock markets, Chinese investors may have reacted more positively to merger announcements regardless of the mergers’ prospects for success. Second, similar to Shapiro and Li (2016), I suggest that stages of industry and organizational development better explain the actual motivation and success of Chinese acquirers than does a general theory of culture or corporate governance traditions.

Type
Commentaries
Information
Management and Organization Review , Volume 12 , Issue 2 , June 2016 , pp. 249 - 257
Copyright
Copyright © The International Association for Chinese Management Research 2016 

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References

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