Acknowledgement

Three-day event window of event study methodology has been widely used in practice to assess the abnormal returns of shareholders during the occurrence of mergers and acquisitions. A relatively short-horizon event window such as one-day or three-day period increases the probabilities to control confounding effect from other market events. Conversely, by employing long-horizon event windows such as 5-days, 11- days, we can examine the sensitivity of the results and also observe the future trend of the takeover returns.

In addition, the study only controls for a very limited set of factors in the cross-section analysis of targets due to the limited availability of information. For example, the governance factors which reflecting the governance quality of the targets firms should also be examined in the cross-sectional study (e.g., ratio of independent directors, takeover provisions, and so on).

One more interesting area for the future research of Chinese M&As is to examine the wealth created by both targets and acquirers. It is well-known that M&As are made to create synergy. Since Chi et al. (2011) mainly study the wealth effects of the Chinese listed acquiring firms, and this study examines the wealth effects on the Chinese listed targets, therefore, by well utilizing cross-sectional studies, it should be interesting to look at the total CARs created by both targets and acquirers in a short-run period around the announcement date.

In section 4.1, the study shows several hypotheses that can explain the wealth gain of the target’s shareholders that are empirically tested by using U.S. data. However, none of these tests is conducted using Chinese data because there were little data about Chinese listed targets at that time. Due to the availability of well-computerized dataset nowadays, it is important to re-evaluate the target’s returns and differentiate between the effect of the target’s re-valuation and managerial hubris. Answering these questions are possible and it leaves a promising area for future research.

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