- Title
- Use of comment letters for mergers and acquisitions in a setting with weak investor protection: The Chinese experience
- Creator
- Lyu, Kefu; Wu, Huiying; Ying, Sammy Xiaoyan; You, Jiaxing
- Relation
- Journal of Accounting and Public Policy Vol. 46, Issue July-August 2024, no. 107227
- Publisher Link
- http://dx.doi.org/10.1016/j.jaccpubpol.2024.107227
- Publisher
- Elsevier
- Resource Type
- journal article
- Date
- 2024
- Description
- We adopt a principal–principal perspective to examine whether comment letters for mergers and acquisitions (M&A) protect shareholders, particularly minority shareholders, of acquiring firms in China, where investor protection is weak. This public enforcement tool has several features: (i) regulators provide detailed comments on various matters, (ii) various stakeholders are called upon to respond, and (iii) failure to adequately address the comments to the satisfaction of regulators results in M&A applications being rejected. Our main results show that M&A comment letters affect the outcome of M&A transactions by reducing acquisition premium and improving the fulfillment of performance commitment. Furthermore, this effect is more pronounced when the principal–principal conflict is more severe, as indicated by a greater divergence between cash flow rights and control rights, along with weaker monitoring by multiple large shareholders. Our results suggest that M&A comment letters, if used appropriately, effectively enhance investor protection in less developed economies. We contribute to the literature by providing new evidence of the effects of M&A comment letters in settings with weak investor protection.
- Subject
- public enforcement; countries with weak investor protection; China; comment letter; mergers and acquisitions; SDG 17; Sustainable Development Goal
- Identifier
- http://hdl.handle.net/1959.13/1507119
- Identifier
- uon:55970
- Identifier
- ISSN:0278-4254
- Language
- eng
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