Internal capital market mergers in weak external market environment: An emerging market evidence
Huang, Wei; Zhang, Hong; Goyal, Abhinav; Laws, Jason
Date:
2019-07-31
Copyright:
© 2019 John Wiley & Sons, Ltd. This is the peer reviewed version of the following article: Huang, W, Zhang, H, Goyal, A, Laws, J. Internal capital market mergers in weak external market environment: An emerging market evidence. Int J Fin Econ. 2019; 24: 1486– 1505, which has been published in final form at https://doi.org/10.1002/ijfe.1739 This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Full text restriction information:
Access to this article is restricted until 24 months after publication by request of the publisher
Restriction lift date:
2021-07-31
Citation:
Huang, W., Zhang, H., Goyal, A. and Laws, J. (2019) 'Internal capital market mergers in weak external market environment: An emerging market evidence', International Journal of Finance & Economics, 24(4), pp. 1486-1505. doi: 10.1002/ijfe.1739
Abstract:
Using Chinese split‐share structure reform as backdrop, we study the alternative theories explaining the change in objectives of internal capital markets (ICMs) after regulatory intervention. Focusing on related party merger and acquisitions, as the primary form of ICM transactions in China, we document significantly positive performance improvement among the acquiring firms around related party than nonrelated party merger and acquisitions in the period following the split‐share structure reform. This evidence is particularly stronger among acquirers with lower institutional shareholding. Our findings are invariant to the length of performance evaluation window, matched samples, model specifications, acquirers' ownership structure, and business group affiliations. After controlling for alternative channels of tunnelling and propping, contrary to the popular belief, our findings support the bright‐side view of ICMs postregulatory intervention in an emerging market set‐up.
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