Do the ties of corporate executives and directors affect short-term M&A return growth? Evidence from China

Figures & data

Table 1. Definition and measurement of control variables.

Variable symbol	Variable name and measurement method
RS	Relative size. The ratio of the target company's logarithmic total assets to the acquirer's logarithmic total assets.
Q	Tobin Q value of the acquiring firms. It is defined as the company’s market value / (total assets - net intangible assets - net goodwill).
Lev	Lev is defined as the ratio of total liabilities to total assets.
Cash_flow	Cash_flow is defined as the ratio of cash flow to total assets.
Tran_value	Tran_value (million) is the transaction value of M&A.
Stock_deal	Dummy variable, A stock deal implies that the acquisition is paid with stock.
Related	Dummy variable. When a deal is related transaction, the dummy variable equals 1, otherwise 0.
Touched_offer	Dummy variable. When the transaction is a tender offer, the dummy variable equals 1, otherwise 0.
Year	Dummy variable. When the M&A event belongs to a specific year, the dummy variable takes 1; otherwise, it takes 0.
Industry	Dummy variable. Whether the acquirer and the target are in the same industries.

This table provides variable names used in this article and measurement methods. The sample period is from 2000 to 2017. Source: The variables are selected by referring to the studies of Ishii and Xuan (2014) and Ahuja and Katila (2001). The data are from CSMAR database.

Figure 1. The transaction amount from 2000 to 2019 in China.

This figure shows the M&A transaction amount from 2000 to 2019 in the Chinese market.

Source: the data is from http://www.cvsource.com.cn/

Table 2. The number of acquisitions.

Industry	Full sample	Percent (%)	High ST sample	Percent (%)	Low ST sample	Percent (%)
Public utility	13	8.28	9	11.54	4	5.06
Real estate	8	5.10	2	2.56	6	7.59
Comprehensive industry	13	8.28	8	10.26	5	6.33
Heavy and light industry	109	69.43	50	64.10	59	74.68
Business	14	8.92	9	11.54	5	6.33
Total	157	100	78	100.00	79	100.00

This table reports the number of acquisitions categorized by the acquiring firms’ industry. The sample is denoted as High ST sample when the ST value is greater than its median. Source: Created by the authors based on CSMAR database.

Table 3. Summary statistics of CAR.

CAR	Full sample		High ST sample		Low ST sample
	Mean	Standard deviation	Mean	Standard deviation	Mean	Standard deviation
Acquirer
[-1,+1]	−0.97	1.29	−1.12	1.26	−0.82	1.30
[-2,+2]	−1.63	2.14	−1.88	2.09	−1.37	2.17
[-3,+3]	−2.29	2.99	−2.64	2.92	−1.94	3.04
Target
[-1,+1]	−0.89	1.17	−0.84	1.17	−0.90	1.17
[-2,+2]	−1.45	1.93	−1.39	1.95	−1.51	1.92
[-3,+3]	−2.04	2.70	−1.95	2.73	−2.13	2.69
Combined
[-1,+1]	−0.99	1.09	−1.08	1.02	−0.90	1.16
[-2,+2]	−1.66	1.81	−1.79	1.69	−1.53	1.91
[-3,+3]	−2.34	2.53	−2.52	2.37	−2.16	2.67
Number of observations	157		78		79

This table provides summary statistics for CAR of acquiring firms, target firms, and combined firms, respectively. Source: Created by the authors based on CSMAR database.

Table 4. Correlation analysis of major variables.

	Acquirer_CAR	Target_CAR	Co_CAR	ST	Lock
Acquirer_CAR	1
Target_CAR	0.19***	1
Co_CAR	0.67***	0.71***	1
ST	−0.21***	−0.08	−0.24***	1
Lock	−0.22***	−0.11**	−0.23***	0.59***	1

This table provides the correlation matrix for the following variables: Acquirer_CAR, Target_CAR, Co_CAR, ST, and Lock. Asterisks denote statistical significance at the 1% (***), 5% (**), or 10% (*) level. Source: Created by the authors based on CSMAR database.

Table 5. The effect of corporate social ties on M&A performance.

	Acquirer_CAR		Co_CAR		Target_CAR
	(1)	(2)	(3)	(4)	(5)	(6)
Lock	−1.7619***		−1.2285***		−0.4209*
	(-4.01)		(-3.38)		(-1.89)
ST		−1.6966***		−1.2776**		−0.2141
		(-2.79)		(-2.56)		(-0.33)
RS	1.3831**	1.9739***	0.6240	0.9803	−0.6081	−0.5068
	(2.46)	(2.72)	(0.42)	(0.65)	(-0.34)	(-0.28)
Cash_flow	−0.0811	0.0431	0.4128***	0.4251***	0.6852*	0.6720*
	(-0.33)	(0.17)	(3.72)	(3.76)	(1.71)	(1.67)
Lev	−0.9798**	−1.0555**	0.6849	0.5522	0.0012	0.0012
	(-2.46)	(-2.58)	(1.08)	(0.85)	(0.68)	(0.68)
Q	0.0575	0.0466	0.0956	0.0870	0.0227	0.0294
	(1.01)	(0.80)	(1.12)	(1.00)	(0.55)	(0.72)
Tran_value	0.00038	0.00031	0.000063	0.000016	0.0002**	0.00018**
	(1.43)	(1.11)	(0.28)	(0.07)	(2.39)	(2.35)
Stock_deal	0.9788**	0.9761**	0.3582	0.3558	−0.3413	−0.3398
	(2.19)	(2.12)	(0.99)	(0.97)	(-0.77)	(-0.77)
Related	0.0739	0.1006	−0.8469	−0.0512	−0.0932	−0.0795
	(0.38)	(0.50)	(-0.51)	(-0.30)	(-0.45)	(-0.38)
Touched_offer	−0.3182	−0.2267	1.0987	1.1339	0.7068	0.7104
	(-0.23)	(-0.16)	(0.94)	(0.95)	(0.51)	(0.51)
Intercept	−5.4745**	−7.5465***	−1.5351	−2.8114*	−0.3825	−0.7355
	(-2.59)	(-3.60)	(-0.90)	(-1.67)	(-0.18)	(-0.44)
Adj.R^2	0.297	0.254	0.332	0.307	0.178	0.173

The table displays the regression results of corporate social ties on merger performance when controlling for the year fixed effects and industry fixed effects. Asterisks denote statistical significance at the 1% (***), 5% (**), or 10% (*) level. Source: Created by the authors based on CSMAR database.

Table 6. Regression results under different corporate governance environments.

	Acquirer_CAR		Co_CAR		Target_CAR
	(7)	(8)	(9)	(10)	(11)	(12)
Lock	−1.9877**		−1.2763*		−0.0687
	(-2.48)		(-1.95)		(-1.06)
$\mathit{Lock}\times$CGQ	0.0093*		0.0017**		0.0053
	(1.88)		(2.12)		(0.29)
ST		−1.5985***		−1.4978***		−1.5830
		(-3.20)		(-2.83)		(-1.07)
$ST\times$ CGQ		0.0502*		0.0051**		0.0023
		(1.81)		(2.16)		(0.06)
CGQ	0.0042	0.0059	0.0045	0.0029	−0.0054	−0.0104
	(0.47)	(1.05)	(0.33)	(0.48)	(-0.31)	(-1.45)
RS	1.4052		1.8086**	2.2397	−0.0429	0.0530
	(1.19)		(1.99)	(1.45)	(-0.02)	(0.03)
Cash_flow	0.0753	0.1841	0.3711***	0.3811***	0.0964	0.0875**
	(0.32)	(0.84)	(3.39)	(3.42)	(0.56)	(2.51)
Lev	−0.5303	−0.4616	0.5896	0.4195	0.8832**	−0.8796**
	(-1.42)	(-1.31)	(0.93)	(0.64)	(2.23)	(-2.22)
Q	0.0485	0.0348	0.0052	−0.0259	−0.0052	−0.0011
	(0.90)	(0.69)	(0.05)	(-0.25)	(-0.13)	(-0.03)
Tran_value	0.000081	0.00006	0.000088	0.000035	0.00018**	0.00019**
	(0.32)	(0.25)	(0.41)	(0.16)	(2.60)	(2.57)
Stock_deal	0.8613**	0.7384*	0.3597**	0.3495	−0.4328	−0.4370
	(2.00)	(1.80)	(2.01)	(0.97)	(-1.11)	(-1.02)
Related	0.1812	0.2155	−0.0629	−0.0221	−0.0436	−0.0377
	(0.96)	(1.21)	(-0.39)	(-0.13)	(-0.22)	(-0.19)
Intercept	−0.3750	−1.2371	−2.4040	−3.7437**	−1.1195	−1.1800
	(-0.39)	(-1.58)	(-1.26)	(-2.13)	(-0.48)	(-0.57)
Adj.R^2	0.359	0.323	0.345	0.323	0.206	0.203

This table reports the effect of social ties on merger performance under different corporate governance environments. Asterisks denote statistical significance at the 1% (***), 5% (**), or 10% (*) level. Source: Created by the authors based on CSMAR database.

Table 7. The effect of corporate social ties on the target retention.

	Rete_1		Rete_2
	(13)	(14)	(15)	(16)
Lock	0.1333***		0.4642***
	(4.39)		（2.64）
ST		0.0759***		0.3247*
		(3.71)		(1.79)
Ability	0.0455*	0.0424**	0.0933*	0.0598
	（1.70）	(2.19)	（1.67）	(1.16)
RS	−0.222	−0.3078	−0.2182	−0.2967
	(-0.81)	(-1.46)	(-0.50)	(-0.68)
Cash_flow	−0.0102	0.0335	−0.0622	−0.0773
	(-0.12)	(0.51)	(-0.53)	(-0.67)
Lev	−0.1142	0.0679	−0.5134*	−0.6113**
	(-0.60)	(0.45)	(-1.75)	(-2.03)
Q	0.0426**	0.0043**	−0.0950**	−0.1565***
	(2.01)	(2.45)	(-2.14)	(-2.91)
Tran_value	0.00003	0.000004	−0.0001	0.00002
	(0.50)	(0.09)	(-0.44)	(0.08)
Stock_deal	0.0722*	0.0734	0.3235*	0.2576
	(1.71)	(1.01)	(1.75)	(1.42)
Related	0.0272	0.0092	0.0616	0.0489
	(0.58)	(0.26)	(0.84)	(0.70)
Intercept	1.000***	1.2119***	1.2536**	1.8427***
	（3.00）	（4.10）	(2.24)	(3.31)
Year	NO	YES	NO	YES
Industry	NO	YES	NO	YES
Number of observations	105	105	78	78
Adj. R^2	0.251	0.432	0.174	0.331

This table reports the effect of social ties on target retention. Rete_1= The number of the target's executives and directors retained in the combined firm/Target's pre-acquisition board size. Rete_2= The number of the target's executives and directors retained in the combined firm/The combined firm's post-acquisition board size. Source: Created by the authors based on CSMAR database.

Table 8. The effect of corporate social ties on the M&A performance.

	Acquirer_CAR		Co_CAR		Target_CAR
	[-2, 2]	[-3, 3]	[-2, 2]	[-3, 3]	[-2, 2]	[-3, 3]
ST	−1.8072**	−1.8237**	−1.9142**	−2.6329**	−0.6846	−0.9049
	(-2.29)	(-2.27)	(-2.20)	(-2.16)	(-0.63)	(-0.59)
RS	1.2129**	1.6626***	1.579	2.1375	−0.9953	−0.9851
	(2.19)	(2.81)	(0.97)	(0.94)	(-0.95)	(-1.02)
Cash_flow	0.0975	0.1410	1.0351*	1.4304***	0.5087*	0.7116*
	(0.31)	(0.22)	(1.71)	(3.76)	(1.72)	(1.88)
Lev	−1.2212*	−1.7087*	0.5106	0.6724	0.084	0.1177
	(-1.68)	(-1.69)	(0.45)	(0.43)	(1.40)	(1.44)
Q	0.1106	0.1620	0.1217	0.1508	0.0483	0.0554
	(1.00)	(1.05)	(0.82)	(0.73)	(0.38)	(0.31)
Tran_value	0.00042	0.00058	−0.00011	−0.00016	0.0002***	0.00041***
	(0.85)	(0.85)	(-0.27)	(-0.30)	(2.61)	(2.62)
Stock_deal	1.5362*	2.1324*	0.4819**	0.6532*	0.1233	0.1394
	(1.89)	(1.87)	(2.40)	(1.97)	(0.16)	(0.13)
Related	0.4848	0.6604**	0.0631	0.0771	0.0053	0.0085
	(1.36)	(2.32)	(0.22)	(0.19)	(0.02)	(0.02)
Touched_offer	−0.4624	−0.4994	1.9791	3.0181	2.2145	3.3497
	(-0.18)	(-0.14)	(0.96)	(1.04)	(0.89)	(0.96)
Intercept	−3.5179	−4.8457	−4.1655**	−5.654**	−1.478	−2.325
	(-1.38)	(-1.36)	(-2.00)	(-1.94)	(-0.53)	(-0.59)
Adj. R^2	0.1575	0.1595	0.2312	0.2306	0.1783	0.1797

This table reports the results when we change the event window and choose CAR[-2, +2] and CAR[-3, +3] as dependent variables. Source: Created by the authors based on CSMAR database.

Table 9. The moderating effect of corporate governance.

	CAR[-1,+1]
	(1)	(2)	(3)
Lock	−2.1052*	−2.9219**
	(-1.68)	(-2.21)
$\mathit{Lock}\times$CGQ	0.0263*	0.0382*
	(1.83)	(1.85)
ST			−2.9091*
			（-1.78）
$ST\times$ CGQ			0.0233*
			(1.87)
CGQ	−0.0149	−0.0290	0.0061
	(-0.77)	(-1.42)	(0.96)
Cash_flow	0.0069	−0.0071	−0.0423
	(0.04)	(-0.04)	(-0.22)
Lev	0.3994	0.7335**	0.5799*
	(1.43)	(2.49)	(1.89)
Q	0.0360	0.0419	0.0625
	(0.86)	(0.99)	(1.42)
transaction_value	−0.00021	0.000023	0.00042**
	(-1.07)	(0.11)	(2.00)
Stock_deal	0.9523***	0.7015**	−0.0863
	(2.86)	(2.09)	(-0.24)
Related	0.1380	0.0443	0.1293
	(0.97)	(0.30)	(0.84)
Intercept	0.0989	0.7358	−1.4092*
	（0.08）	（0.51）	(-1.95)
Adj. R^2	0.099	0.190	0.230

This table shows the moderating effect of corporate governance when using the shareholding ratio of executives to measure corporate governance quality. Source: Created by the authors based on CSMAR database.

Table A1. Summary statistics of the control variables.

	ST	RS	Cash_flow	Lev	Q	Tran_value	Stock_deal	Related	Touched_offer
Panel A: Summary statistics of control variables
Mean	0.12	1.01	−0.08	0.54	2.21	160.69	0.06	0.39	0.01
Medium	0.05	1.01	−0.05	0.54	1.99	48.95	0.00	0.00	0.00
Std	0.16	0.09	0.22	0.14	1.18	404.21	0.23	0. 49	0.07
Skewness	1.74	−0.62	−3.15	−0.56	2.18	5.44	3.80	0.42	12.40
Kurtosis	2.35	3.85	21.51	0.53	7.81	33.37	12.50	−1.81	15.20
Panel B: Correlation matrix
RS	−0.06	1
Cash_flow	−0.04	0.04	1
Lev	−0.05	−0.02	−0.04	1
Q	−0.11	0.01	0.01	−0.45***	1
Tran_value	−0.06	0.13*	0.06	0.06	−0.07	1
Stock_deal	−0.05	0.20***	0.03	0.14*	−0.05	0.37***	1
Related	0.13	0.03	0.05	0.10	−0.13*	0.05	0.13*	1
Touched_offer	−0.05	0.03	0.01	0.04	0.01	0.46***	0.32***	0.09	1

Ishii, J., & Xuan, Y. (2014). Acquirer-target social ties and merger outcomes. Journal of Financial Economics, 112(3), 344–363. https://doi.org/10.1016/j.jfineco.2014.02.007

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