Bid premium in Chinese outbound M&A

Abstract

In this paper we study whether Chinese firms bid higher on average when involved in outbound mergers and acquisitions, compared to bidders from the rest of the world. We argue that the unique Chinese context due to the country’s spectacular economic growth and communist state control provide Chinese firms with different premises than firms in other parts of the world, and that this might affect the bid premium. Using a sample of 12.700 transactions between 1986 and 2011, collected from Thomson Financial SDC we find evidence that Chinese firms do pay a higher premium for target firm in specific industries such as Mining and Construction. We also find that Chinese firms pay a higher premium when involved in outbound mergers and acquisitions after the financial crisis in 2008.