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《Economic Research Journal》 2008-04
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Government Intervention,Political Connections and the Mergers of Local Government-Controlled Enterprises

Pan Hongbo, Xia Xinping and Yu Minggui(Economics and Management School, Wuhan University; School of Management, Huazhong University of Science and Technology)  
Using a sample of mergers with local government-controlled acquirers and unlisted target firms from 2001 to 2005, we examine the effects of local government intervention and political connections on the performance of local government-controlled acquirers. We find that local government intervention has a negative impact on the performance of local government-controlled acquirers with good operating performance before merger announcement, while a positive impact on the performance of local government-controlled acquirers with poor operating performance before merger announcement. These results indicate that local government has motive to grab or help the local government-controlled firms providing support for the "grabbing-hand model" and "helping-hand model". We also find that political connections have positive effects on the performance of local government-controlled acquirers with good operating performance before merger announcement, which indicates that political connections can be used as the substitution of investor protection to prevent the local government from expropriating the firms.
【Fund】: 国家自然科学基金项目(批准号:70602013)的阶段性成果
【CateGory Index】: F279.2
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