Analysis of the Market Reaction to the Information on Mergers and Acquisitions of High-Tech Family-Owned Companies in China

Mergers and acquisitions (M&A) are used by many companies as a strategy for business expansion. Despite the turbulence of this market in recent years, family-owned companies often act as strategic acquirers, especially in the high-tech sector of the economy. Chinese family-owned companies are active players in this market. The object of the study are mergers and acquisitions performed by Chinese family-owned companies in high-tech sector of the economy from 2018 to 2022. The purpose of the study is the reaction of the Chinese stock market to the announcements on mergers and acquisitions made by high-tech public family-owned companies. The study was conducted by event study and multiple regression analysis methods on a sample of 259 Chinese family companies that had announced mergers and acquisitions in the high-tech sector. It was revealed that the market reacts positively to information about such transactions: 75% of deals in the sample generate positive cumulative abnormal returns, 1.7% higher on average than the return calculated based on the market model. Shareholder value increases as the share of family ownership in the acquiring company increases and decreases as the share decreases. Market reaction is positive when a deal diversifies the core business portfolio. If a chief executive officer does not belong to the owner’s family, the deal is perceived negatively by the market. A positive market reaction is related to the independence of the acquirer’s board of directors, whereas the large size of the board of directors is negatively associated with cumulative abnormal returns. Cross-border deals are negatively related to the market reaction. The results of the study may be useful for the management of Russian companies considering internationalization and investors due to the growing economic ties between Russian and Chinese businesses. They are also of interest to researchers who study mergers and acquisitions in emerging markets.

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