Why Are Chinese MNES Not Financially Competitive in Cross-border Acquisitions? The Role of State Ownership

While MNEs from emerging markets and China in particular tend to pay high acquisition premiums when they engage in cross border acquisition activity, the determinants of this overbidding are not completely understood. We argue that state ownership is a key factor in explaining the high acquisition premiums paid by emerging-market multinationals. Employing data on 450 Chinese outward cross-border acquisitions over the 1990-2011 period, we find that Chinese state-owned MNEs pay higher acquisition premiums than do non-state-owned MNEs, that this is particularly the case for target firms based in developed-nations, and that state-owned MNEs pay even higher acquisition premiums when they act as parents and employ a privately-owned subsidiary to complete the cross-border acquisition. (C) 2016 Elsevier Ltd. All rights reserved.