To what extent does corporate liquidity affect M&A decisions, method of payment and performance? Evidence from China

Yang, J.; Guariglia, A.; Guo, J.

Abstract

Using a panel of Chinese listed firms over the period 1998–2015, we examine the extent to which liquidity impacts firms' acquisition decisions, method of payment choice, and performance following mergers. We observe that cash-rich firms are more likely to attempt acquisitions, especially if they are subject to tunneling. Next, we find that bidders with higher growth opportunities are less likely to use cash payments in acquisitions. This effect is stronger for financially constrained bidders, who face greater opportunity costs of holding cash. Our last set of results highlights the under-performance of cash acquisitions in both the short and long term.

Citation

Yang, J., Guariglia, A., & Guo, J. (2019). To what extent does corporate liquidity affect M&A decisions, method of payment and performance? Evidence from China. Journal of Corporate Finance, 54, 128-152. https://doi.org/10.1016/j.jcorpfin.2017.09.012

• Journal Article Type: Article
• Acceptance Date: Sep 21, 2017
• Online Publication Date: Dec 17, 2017
• Publication Date: Feb 28, 2019
• Deposit Date: Sep 22, 2017
• Publicly Available Date: Sep 22, 2017
• Journal: Journal of Corporate Finance
• Print ISSN: 0929-1199
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 54
• Pages: 128-152
• DOI: https://doi.org/10.1016/j.jcorpfin.2017.09.012
• Public URL: https://durham-repository.worktribe.com/output/1376023