Abstract

In this paper, we examine whether and how bureaucratic redundancy affects cross-province M&As. Using novel province-level Chinese data, we find that local acquirers with higher bureaucratic redundancy are more likely to merge with non-local targets. This phenomenon is more pronounced in those firms located in population outflow areas, with fewer political connections and closer to the government headquarters. Local acquirers tend to choose a non-local target located in another province with lower bureaucratic redundancy and tend to conduct cross-province M&A’s in cash to avoid the expropriation by excess local government officials. As a consequence, acquirers after cross-province M&A experience greater performance improvement. Overall, our findings shed light on how property rights institutions shape corporate boundary decisions in emerging markets.

Biography

Dr. Muyang Zhang is a Tenured Associate Professor at College of Public Finance and Investment, Shanghai University of Finance and Economics. He acquired Ph.D. degree in theoretical economics at National School of Development, Peking University in Beijing in 2013. After that, he joined Shanghai University of Finance and Economics. His major research interests is the behavior of local government, such as cadre management and its economic consequence, local government debt, and local government investment. In recent years, he also worked on issues of local government budget.