The Link Between Acquisition Goals and Post-Deal Performance: Evidence from China

The paper is looking into possible links between the stated goals of acquisitions and subsequent operating performance relying on M&A transaction data of listed Chinese companies. Empirical analysis runs through two stages: first, pre-screening to identify goals with the highest predictive power and then multivariate cross-section regression models. The results suggest that most transactions fail to achieve meaningful improvements in operating performance. Goals have a weak predictive power across diverse performance measures. The declared goal of expanding into new or foreign markets is positively associated with sales growth. In combination with intended operational strengthening, it is also associated with higher return on capital, though the association does not survive correction for multiple testing and is only partially confirmed under propensity score-matched specification. Other goals exhibit intermittent associative links with some of the performance indicators, but not with others. Goals may signal the type of challenges that the company may be facing upon completing the transaction but do not predict subsequent performance, nor do they allow them to distinguish potentially successful transactions from the failed ones.