The accountability system for operation and investment and M&A performance of state-owned enterprises in China

Abstract

This paper examines the governance effect of the operation and investment accountability (OIA) on merger and acquisition (M&A) performance of Chinese state-owned enterprises (SOEs). Using the OIA system as a policy shock, we employ a staggered DID estimation and find that the implementation of the OIA system significantly improves SOEs' M&A performance, which holds robust after multiple tests. The mechanism analysis reveals that OIA increases post-M&A value by reducing the ineffective M&A and improving M&A integration quality. The heterogeneity analysis indicates that the effect of OIA is more pronounced in samples with larger transaction value, lower asset loss recognition standards, local SOEs, and better institutional environments. This paper contributes to the literature on M&A performance drivers and provides empirical evidence on the role of accountability in corporate governance.