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06.02.2023 | Research Article

The Zone of Conformity: A Comparison of Private and State-Controlled Enterprises in M&As

verfasst von: Sunny Li Sun, Young Jin Ko

Erschienen in: Management International Review | Ausgabe 2/2023

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Abstract

Drawing from the literature on institutional pressure, we argue that firms with different ownership types have different strategic options in domestic and overseas markets, namely the zone of conformity. State-controlled enterprises (SCEs) have a broader range of acceptable actions than do private-controlled enterprises (PCEs) in a domestic market but face more sanctions and stricter conformity requests in an overseas market. The concept of the zone of conformity predicts SCEs have a higher probability of deal failure overseas than in domestic markets and strategically seek less equity ownership of target firms in cross-border deals. The autocracy level of target country moderates the M&A behaviors difference between SCEs and PCEs. Our analysis of 12,497 Chinese mergers and acquisitions supports the study hypotheses.

Vorheriger Artikel Entry Mode Choice: A Meta-Analysis of Antecedents and Outcomes

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We included subsidiary firms that were privately held if their ultimate parents were publicly traded. We coded the subsidiary as SCE if its ultimate parent was an SCE. Although we dropped deals by subsidiaries, our results remained the same.

We first excluded 4,200 transactions with no disclosed deal value. Second, we dropped deals in which the ratio of the transaction value to the bidder’s equity value was less than 5% (Jacobsen, 2014). Third, we excluded deals by foreign-invested acquirers to mitigate the possible confounding effect for them to conform to different institutional legitimacies. Fourth, we eliminated deals for which the SDC did not report equity ownership sought. Finally, we excluded deals with missing values.

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Titel: The Zone of Conformity: A Comparison of Private and State-Controlled Enterprises in M&As
verfasst von: Sunny Li Sun
Young Jin Ko
Publikationsdatum: 06.02.2023
Verlag: Springer Berlin Heidelberg
Erschienen in: Management International Review / Ausgabe 2/2023
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-023-00501-9

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