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Foreign Direct Investments in the German Stock Market from China and the Gulf States

Achleitner, Ann-Kristin | Bazhutov, Dmitry | Betzer, André | Keppler, Henry

Credit and Capital Markets – Kredit und Kapital, Vol. 54 (2021), Iss. 4: pp. 563–587

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Article Details

Author Details

Prof. Dr. Dr. Ann-Kristin Achleitner, Center for Entrepreneurial and Financial Studies (CEFS), Technical University of Munich, Arcisstr. 21, 80333 Munich.

Dr. Dmitry Bazhutov, Schumpeter School of Business and Economics, University of Wuppertal, Gaußstr. 20, 42119 Wuppertal, Germany.

Prof. Dr. André Betzer, Schumpeter School of Business and Economics, University of Wuppertal, Gaußstr. 20, 42119 Wuppertal, Germany.

Dr. Henry Keppler, Center for Entrepreneurial and Financial Studies (CEFS), Technical University of Munich, Arcisstr. 21, 80333 Munich, Germany.

References

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  10. Buckley, P. J./Clegg, L. J./Voss, H./Cross, A. R./Liu, X./Zheng, P. (2018): A retrospective and agenda for future research on Chinese outward foreign direct investment. Journal of International Business Studies, Vol. 49(1), 4–23.  Google Scholar
  11. Buckley, P. J./Yu, P./Liu, Q./Munjal, S./Tao, P. (2016): The institutional influence on the location strategies of multinational enterprises from emerging economies: Evidence from China’s cross-border mergers and acquisitions. Management and Organization Review, Vol. 12(3), 425–448.  Google Scholar
  12. Cermak, C. (2017, March 25): Qatar Looks for Leverage. Handelsblatt. Retrieved from https://www.handelsblatt.com/english/finance/german-investment-qatar-looks-for-leverage/23568240.html.  Google Scholar
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  37. Achleitner, A.-K./Braun, R./Kaserer, C./Jarchow, S./Szewczyk, J./Keppler, H. (2019): Börsennotierte Familienunternehmen in Deutschland – Bedeutung, Merkmale, Performance. München: Stiftung Familienunternehmen.  Google Scholar
  38. Alvaredo, F./Assouad, L./Piketty, T. (2019): Measuring Inequality in the Middle East 1990–2016: The World’s Most Unequal Region? Review of Income and Wealth, Vol. 65(4), 685–711.  Google Scholar
  39. Anderson, J./Sutherland, D. (2015): Entry mode and emerging market MNEs: An analysis of Chinese greenfield and acquisition FDI in the United States. Research in International Business and Finance, Vol. 35, 88–103.  Google Scholar
  40. Boehmer, E./Musumeci, J. J./Poulsen, A. B. (1991): Event study methodology under conditions of event induced variance. Journal of Financial Economics, Vol. 30(2), 253–272.  Google Scholar
  41. Boisot, M./Meyer, M. W. (2008): Which way through the open door? Reflections on the internationalization of Chinese firms. Management and Organization Review, Vol. 4(3), 349–365.  Google Scholar
  42. Bremmer, I. (2010): Article Commentary: The End of the Free Market: Who wins the war between States and Corporations? European View, Vol. 9(2), 249–252.  Google Scholar
  43. Brown, S./Warner, J. (1980): Measuring security price performance. Journal of Financial Economics, Vol. 8(3), 205–258.  Google Scholar
  44. Brown, S./Warner, J. (1985): Using daily stock returns: The case of event studies. Journal of Financial Economics, Vol. 14(1), 3–31.  Google Scholar
  45. Buckley, P. J./Clegg, L. J./Cross, A. R./Liu, X./Voss, H./Zheng, P. (2007): The determinants of Chinese outward foreign direct investment. Journal of International Business Studies, Vol. 38(4), 499–518.  Google Scholar
  46. Buckley, P. J./Clegg, L. J./Voss, H./Cross, A. R./Liu, X./Zheng, P. (2018): A retrospective and agenda for future research on Chinese outward foreign direct investment. Journal of International Business Studies, Vol. 49(1), 4–23.  Google Scholar
  47. Buckley, P. J./Yu, P./Liu, Q./Munjal, S./Tao, P. (2016): The institutional influence on the location strategies of multinational enterprises from emerging economies: Evidence from China’s cross-border mergers and acquisitions. Management and Organization Review, Vol. 12(3), 425–448.  Google Scholar
  48. Cermak, C. (2017, March 25): Qatar Looks for Leverage. Handelsblatt. Retrieved from https://www.handelsblatt.com/english/finance/german-investment-qatar-looks-for-leverage/23568240.html.  Google Scholar
  49. Dunning, J. H. (1988): The theory of international production. The International Trade Journal, Vol. 3(1), 21–66.  Google Scholar
  50. Dunning, J. H. (2001): The eclectic (OLI) paradigm of international production: past, present and future. International Journal of the Economics of Business, Vol. 8(2), 173–190.  Google Scholar
  51. Erel, I./Liao, R. C./Weisbach, M. S. (2012): Determinants of cross-border mergers and acquisitions. The Journal of Finance, Vol. 67(3), 1045–1082.  Google Scholar
  52. Faccio, M./Lang, L. H. P. (2002): The ultimate ownership of Western European corporations. Journal of Financial Economics, Vol. 65(3), 365–395.  Google Scholar
  53. Fuest, C./Hugger, F./Sultan, S./Xing, J. (2019): What Drives Chinese Overseas M&A Investment? Evidence from Micro Data. EconPol Working Paper 33, November 2019. Retrieved from https://www.econpol.eu/publications/working_paper_33.  Google Scholar
  54. Harris, J. (2009): Statist globalization in China, Russia and the Gulf states. Perspectives on Global Development and Technology, Vol. 8(2–3), 139–163.  Google Scholar
  55. Jandik, T./Kali, R. (2009): Legal systems, information asymmetry, and firm boundaries: Cross-border choices to diversify through mergers, joint ventures, or strategic alliances. Journal of International Business Studies, Vol. 40(4), 578–599.  Google Scholar
  56. Karolyi, G. A./Liao, R. C. (2017): State capitalism’s global reach: Evidence from foreign acquisitions by state-owned companies. Journal of Corporate Finance, Vol. 42, 367–391.  Google Scholar
  57. Kastner, J. (2019, November 1): The end of China ODI? Retrieved from https://knowledge.ckgsb.edu.cn/2019/11/01/chinese-economy/end-china-odi/.  Google Scholar
  58. La Porta, R./Lopez-de-Silanes, F./Shleifer, A. (1999): Corporate Ownership Around the World. The Journal of Finance, Vol. 54(2), 471–517.  Google Scholar
  59. Luo, Y./Tung, R. L. (2007): International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, Vol. 38, 481–498.  Google Scholar
  60. MacKinlay, A. C. (1997): Event studies in economics and finance. Journal of Economic Literature, Vol. 35(1), 13–39.  Google Scholar
  61. Mathews, J. A. (2002): Competitive advantages of the latecomer firm: A resource-based account of industrial catch-up strategies. Asia Pacific Journal of Management, Vol. 19(4), 467–488.  Google Scholar
  62. Paul, J./Benito, G. R. G. (2018): A review of research on outward foreign direct investment from emerging countries, including China: what do we know, how do we know and where should we be heading? Asia Pacific Business Review, Vol. 24(1), 90–115.  Google Scholar
  63. Reuters (2016, December 30): China’s Midea receives U.S. green light for Kuka takeover. Retrieved from https://www.reuters.com/article/us-kuka-m-a-mideamidea-group-idUSKBN14J0SP.  Google Scholar
  64. Reuters (2017, March 1): Saudi Arabian sovereign fund may invest in German tech, finance companies. Retrieved from https://www.reuters.com/article/saudi-germany-investment/saudi-arabian-sovereign-fund-may-invest-in-german-tech-finance-companies-idINL5N1GE75F.  Google Scholar
  65. Riemenschneider, J./Li, L. (2018): Latest Trends of China Overseas Direct Investment Regulations. Retrieved from http://www.swisscham.org/shanghai/wp-content/uploads/sites/3/2018/08/Latest-Trends-of-China-Overseas-Direct-Investment-Regulations.pdf.  Google Scholar
  66. Rugman, A. M. (2010): Globalization of Chinese Enterprises. Basingstoke, UK: Taylor & Francis.  Google Scholar
  67. Rui, H./Yip, G. S. (2008): Foreign acquisitions by Chinese firms: A strategic intent perspective. Journal of World Business, Vol. 43(2), 213–226.  Google Scholar
  68. Schmid, T./Achleitner, A.-K./Ampenberger, M./Kaserer, C. (2014): Family firms and R&D behavior – New evidence from a large-scale survey. Research Policy, Vol. 43(1), 233–244.  Google Scholar
  69. Stulz, R. M. (2005): The limits of financial globalization. The Journal of Finance, Vol. 60(4), 1595–1638.  Google Scholar
  70. Urban, D. (2019): The effects of culture on CEO power: Evidence from executive turnover. Journal of Banking & Finance, Vol. 104, 50–69.  Google Scholar
  71. Wang, C./Hong, J./Kafouros, M./Wright, M. (2012): Exploring the role of government involvement in outward FDI from emerging economies. Journal of International Business Studies, Vol. 43(7), 655–676.  Google Scholar
  72. Xuan, L. (2016, December 18): Chinese overseas investment patterns evolving. China Daily Europe. Retrieved from https://www.chinadaily.com.cn/kindle/2016-12/18/content_27702166.htm.  Google Scholar

Abstract

We document empirical evidence that the investment patterns of the two most relevant investor groups from regions with hierarchical structures in the German stock market, namely China (including Hong Kong) and the Gulf Cooperation Council, differ substantially. Chinese investors buy large shares in relatively small, but not necessarily young, companies. Since their objective is often to gain control, they appear to pay higher premiums when acquiring large equity stakes. Investors from the Gulf states purchase smaller shareholdings in notably larger, older, and more international companies. They seem to seek long-term benefits rather than short-term profits. Our findings are mainly attri­butable to industrial policies pursued by Chinese and Gulf investors, which mirror the different political and economic goals in these two regions.