China's short stock market history has already seen three merger waves, yet little is known of the performance drivers of acquirers. Using an acquirer's announced target value as the proxy of the firm's acquiring capacity, the link between that and its operational and/or financial conditions was investigated. Cash reserve ratio was significant in determining capacity: a firm with a higher cash ratio will, on average, take a larger target firm in both absolute value and relative measure. A larger acquirer size is associated with a larger takeover size, but a lesser target ratio is relative to the size of the acquirer. Firms' debt and profitability ratios do not explain the target size.

JEL Codes

G32, G34, L25, P31, M13


Firm , Firms , Merger , Takeover