Productivity Implications Of Out-in Mergers And Acquisitions For The Chinese Target Entity

Ever increasing foreign M&A investment in China has aroused great upset and heated discussion on China's national economic security. Researchers have investigated this issue from various perspectives. To give an objective assessment of foreign M&A investment, the first thing deserving our effort is to have a correct recognition of the influence of M&A investment in China. This is what we attempt to do in this dissertation. Our focus is the productivity implication of foreign M&A investment in China and we hope this can provide some useful information for decision-making concerning foreign M&A investment policies.Centralizing on the issue whether and how foreign M&A investment influences domestic merged entities, the following essential problems are explored in this dissertation: the first is what the mechanisms are through which foreign M&A investment influences the productivity of the merged entities; the second is whether and if any, in what aspect(s) foreign M&A investment influences the productivity of the merged entities in China, and what factors contribute to these effects; the third is whether bidders from different countries or regions have different effects on the target entity as far as productivity is concerned. Based on these analyses, we make some suggestions concerning foreign M&A investment policies in China.We analyse the mechanisms through which foreign M&A investment influences the productivity of the merged entities from three aspects: foreign M&A investment bringing in more vintage capital, making more rational use of the stock capital of the target enterprise, trading activities ensuing foreign M&A investment giving more and better chances for improving productivity. Then, using Malmquist index, we investigate the productivity implications of foreign M&A investment and the corresponding contributing factors. For most of our M&A samples, total factor productivity after the M&A activity is statistically negatively correlated with that before the M&A activity, and this negative correlation is mainly attribtutable to the technical efficiency aspect, with little change on the technical progress aspect. In view of the technical efficiency improvement at the industry level which consists of those non-target enterprises, we contend that out-in M&As have brought about positive effect on the target enterprises as far as technical efficiency is concerned. However, it is not so optimistic about the technological progress. With little change at the industry level, the target enterprises experience no more technological progress than the non-target enterprises after M&A. In addition to empirically testing the factors influencing productivity which we mentioned in Chapter Four, we go deeper to analyse the institution-changing effect of foreign M&A investment, such as the incentive-constraint problem inherited in the state enterprises, the intellectual property rights protection issue, and the like. To achieve a better productivity effect of foreign M&A investment, more effort is needed on the Chinese side.