Cross-border M&A and firm value: Evidence from Chinese acquisitions of Japanese firms

We study the effect of mergers and acquisitions by Chinese acquirers of Japanese targets (China-Japan M&As) on the firm value. Using the data on China-Japan M&As in 1990-2009, we find that China- Japan M&As show a greater positive effect on stock prices for the targets than for the acquirers. We also observe the following tendencies: 1) the lower the management efficiency of the target is, the greater the market reactions are; 2) a bailout M&A generates greater market reactions for targets than does a non-bailout M&A; 3) capital participation imparts greater market reactions for the target than occur with other forms of M&A; and 4) targets experience smaller market reactions from the subsidiary sales than occur with other forms of M&A.