Political Connections,Executive Shareholding And Overseas M&A

The political connection of a company's foreign investment behavior will have an impact on mergers and acquisitions.Corporate cross-border mergers and acquisitions require government approval and are largely subject to government.Therefore,many companies use various means to maintain good relations with the government,and strengthen the political connection of enterprises by hiring people with government backgrounds to serve as executives of the company.Enterprises have established good relations with the government through executives with government background,thus gaining the inclination and support from the government level.Especially in China's current special system and development stage,the overseas mergers and acquisitions of Chinese enterprises are significantly affected by domestic political factors.Therefore,the extent and mechanism of political associations on M&A behavior is particularly important for overseas M&A;however,modern enterprises have always existed.The principal-agent problem is that the owner of the enterprise pursues the maximization of the interests of the enterprise.Due to the existence of moral hazard,the agent of the enterprise will pursue its own personal income.Enterprises will set up incentives,and one of the important points is equity incentives.By letting executives hold the company's shares and let them become a community of interests to reduce the moral hazard in the agency,Chinese companies often use executives to encourage managers when they establish a modern enterprise system.The shareholding will affect the operation and decision-making of the company through various channels,including overseas mergers and acquisitions.Therefore,the research on the influence mechanism of executives' shareholdings and corporate political relations on cross-border mergers and acquisitions of Chinese enterprises is of great theoretical and practical value.This paper selects the overseas M&A data of 2007-2017 as a sample.From the two dimensions of overseas M&A behavior and M&A performance,this paper proposes corresponding hypotheses,selects relevant variables and establishes models,and explores the relationship of executive shareholding,political connection and overseas Chinese companies between mergers and acquisitions.in the empirical part,firstly this paper studies the influence of executive shareholding and political connection on the overseas M&A behavior of enterprises;secondly,according to the nature of equity,the research enterprises are divided into state-owned enterprises and non-state-owned enterprises,from the two aspects of short-term and long-term performance of enterprises,studying the influence of political connection on the performance of overseas M&A;then,to further explore the degree of influence of political affiliates with different political connections on overseas M&A,this paper uses the valuation method to subdivide the political relationship to explore the relationship between political connections and enterprises and overseas M&A performance;finally,adding executive shareholding to the model,comprehensively discuss the relationship between executive shareholding,political relationship and overseas M&A performance.Through empirical analysis,it is found that the relationship between executives' holdings and political will have an impact on the behavior of overseas mergers and acquisitions,and the greater the proportion of executives,the greater the possibility of overseas mergers and acquisitions,and the politically connected enterprises.Compared with non-politically related companies,there is a stronger motive for overseas mergers;political connections are positively correlated with short-term performance of overseas mergers and acquisitions,and long-term performance is negatively correlated.The stronger the degree of political relevance,the greater the impact on the performance of overseas mergers and acquisitions,while executives hold shares.It will weaken the impact of political connections on overseas M&A performance.Based on this conclusion,the paper puts forward relevant suggestions from three aspects: strategic choice,internal governance and policy response,in order to provide decision-making basis for the corresponding mergers and acquisitions,and improve the success rate of cross-border mergers and acquisitions of Chinese enterprises from relevant perspectives.