When does digital merger and acquisition create shareholder value? An empirical investigation in the Chinese context

Abstract

In China, acquiring firms are increasingly focused on the immediate financial returns that digital mergers and acquisitions (DM&A) can help them achieve in the stock market, but there is little literature that examines which acquiring firms achieve greater returns. Based on signaling theory, this study conceptualizes DM&A announcements as signals released by the acquiring firms to the stock market and explores the factors influencing the Chinese stock market's reaction to such signals. This research empirically investigates potential influencing factors using a short-term event methodology together with regression analysis based on the data collected in China's Shanghai and Shenzhen stock markets during 2012–2021. The research finds that the Chinese stock market reacts more positively to DM&A announcements for acquiring firms with high executive shareholdings, high executive openness, strong digital innovation capabilities, and in regions with higher levels of investor protection. This study is the first attempt to explore the factors influencing the stock market's response to DM&A in the Chinese context.

Keywords

• Digital merger and acquisition
• Stock market reaction
• Investor protection
• Digital innovation capabilities
• Executive characteristics