Strategic Benefits And Perfor, Mance Of Outward Bound Acquisitions By Chinese Companies

China has been completing a large number of investments and acquisitions overseas. In accordance with the economy’s rapid development, domestic companies have been reaching outwards due to the opportunistic nature of the current global economic situation. However, because cross border acquisitions are a recent phenomenon unique to the recently finished decade, there is not much research in this area. This paper will seek to understand the underlying motive for investing overseas, and then consider the benefits attained by these companies. This paper will determine the cumulative abnormal returns during the time the transactions were announced to determine investor sentiment. Afterwards, historical accounting data will be used to compare the cash flow performance, productivity, and operational improvements years before and after the transaction. Governance also plays a role in investing overseas as foreign exposure may have intangible benefits for domestic companies. This paper will look at the number of board seats and board composition to determine whether there is an increase in transparency or board independence. It is hypothesized that investors look at cross-border transactions favorably and that there are operational improvements and increase in cash flows after the foreign investment is completed. Furthermore, it was initially believed that governance does improve because the foreign company may have intangible benefits and influence. After the data analysis was completed, it was determined that investors look at these transactions favorably, reflected by the significant cumulative abnormal returns value. However, operational improvements do not materialize years after the transaction is completed. The ratio of independent board members significantly increases.