The internationalization of Chinese companies: Firm characteristics, industry effects and corporate governance

A prominent issue in the internationalization of Chinese firms is that many are state-owned enterprises (SOEs) and that corporate governance in China is highly idiosyncratic. This paper identifies firm characteristics, industry effects and corporate governance mechanisms that foster internationalization. We find that Chinese cross-border mergers create shareholder value, but not more than domestic expansions. Corporate governance mechanisms matter, jointly and individually. While state-ownership predicts fewer cross-border mergers, a favourable board structure and corporate transparency explains higher M&A returns. As in more mature markets, firm- and industry-specific determinants also affect M&As in China.