Contributing to the Success in Overseas Mergers and Acquisitions by Chinese Enterprises


“I felt fortunate to embark on the journey of financial studies. It requires quantitative skills, rather than just telling stories. It takes my engineering background to a new level”, as Professor Jiang Zhan, Assistant Professor of Finance at Shanghai Advanced Institute of Finance, recalls her decision of switching to finance for her Ph.D. study. She is motivated to find out solutions to the challenges facing Chinese corporations today.

Currently, Professor Jiang is building a research team, and will carry out in-depth investigation and analysis on the “Chinese enterprises overseas M&A” project. She believes that Chinese enterprises have sufficient capital, but the lack of cross-cultural management skills makes it hard to excel at overseas acquisitions. Through her research, she looks forward to contributing to the success in the future overseas M&A by the Chinese enterprises. Moreover, she plans to continue her research in the field of corporate finance, make a difference to SAIF as the top think-tank for Shanghai’s continued growth as an international financial center.

Switching the program to broaden the mind and personal development

“Switching to finance is not a 180 degree turnaround; instead, it brings my education and personal development to the next level”, says Professor Jiang. In her opinion, what she has learned in Mechanical Engineering in the B.S. and M.S. programs is beneficial to her financial studies afterwards. “For example, Black-Scholes Model is one of the most important models in option pricing, a crucial area in financial studies. This model is similar to the models in thermodynamics, which was my area for both bachelor and master degree. From this perspective, my academic background was really helpful for me to switch to financial studies.”

Professor Jiang felt lucky to make this change. “I like Finance very much. My engineering background provides me with some quantitative skills, which are important for research in finance as well”, she says.

As one of the most popular and welcomed young Assistant Professors at SAIF, she shares her thoughts about teaching, “In fact, I wasn’t so into teaching when I was in the U.S.; relatively speaking, I preferred doing research. However, when I came back to China, I was delighted to communicate with students, probably because of the same culture identity. I found it interesting to talk with them just about everything, and recognized the teaching as a way to fulfill social responsibility.”

Doing research to seek solutions to overseas M&A

Professor Jiang’s research interests include corporate finance, mergers and acquisitions, corporate governance, capital structure, dividends and buybacks. In 2012, she published a paper “The Effects of R&D Expenditures on Bondholders”. She explains, “When a company makes a decision or take an action, the reaction of shareholders and bondholders are not necessarily the same.” If a company is planning to invest in research and development, shareholder are usually happy, since it could result in continuous improvement of creativity and value, while bondholders may regard R&D expenditures as a high-risk behavior. She continues, “on the other hand, if a company never invest in research and development, the risk is lower in the short run, but it will lose its competitive advantage in the long run. Therefore, shareholders usually view R&D positively, while bondholders might have complex reactions, they value more on safety instead of growth. Therefore, they might have different viewpoints.”

Professor Jiang suggests, based on U.S. market data, this study may not apply to China, “as for Chinese bond market, many companies’ operation don’t have much impact on bondholders. Why is it so, mainly because the default system in Chinese bond market hasn’t been fully established yet.” She pointed out, “If corporate bond never  default, companies will have no incentive to control their risks effectively.” In her opinion, a healthy default system is crucial for the further development of Chinese bond market.

Currently, Professor Jiang is building a research team, and will carry out in-depth investigation and analysis on the “Chinese enterprises overseas M&A” project. When it comes to this research plan, she excitedly introduces, “M&A is one of my research interests, and I became interested in overseas M&A after coming back to China.” She mentioned, “For example, I happened to participate the process of overseas M&A by a state-owned enterprise. And observe many problems in itMany Chinese enterprises have sufficient capital, but they don’t have adequate experience. The lack of cross-cultural management skills makes overseas acquisitions tougher.”

2004 witnesses the start of the boom in Chinese enterprises overseas M&A. In July 2004, TCL Group acquired Thomson’s TV business and set up a joint venture TTE. Since the loss of European business continued, TTE Europe filed for bankruptcy liquidation in April 2007. TCL Group announced that a settlement has been reached for the First Writ and the Second Writ in relation to TTE Europe between the Multimedia Companies Group on one hand and the official liquidator of TTE Europe on the other hand. At TCL chairman Li Dongsheng’s insistence, the M&A finally ends up with a disaster. As another example, CIC’s investments in Blackstone Group lost $ 1.2 billion within a year. There are many examples in terms of overseas M & A failure of Chinese enterprises. Nevertheless, not only state-owned enterprises, but also private enterprises such as Geely entered overseas M&A market. Are Chinese companies really ready for it?” Professor Jiang comes up with questions using a series of cases.

“I am now engaged in the Chinese market research, and would like to find out solutions for Chinese enterprises. This is the motivation for  my study. Meanwhile, I noticed that state-owned property is also facing numerous problems. For example, how do state-owned firms control state-owned assets, and ensure state-owned assets in overseas M&A, as so on. My drive is to find hope in the predicament, and to succeed eventually. So I hope, our research is valuable, and I hope it can provide Chinese enterprises with constructive suggestions.” Professor Jiang introduces the research project with confidence, “I will cooperate with Professor Paul Burik to build a research team, inviting MBA and EMBA students as well as some technical experts to join us. We will start with a survey, to determine problems and needs before collecting data. After that, we will analyze data based on specific demands, and spread out the research report when it is completed.”

For Europe, it is a hard road to recover the economy. Whether this is a good opportunity for Chinese enterprises to go out? Professor Jiang believes, “at this point, since the purchasing power of RMB has increased, it may be a good opportunity. Yet, it is hard to say that we should embrace overseas acquisition. For example, if a company likes technology and needs to update the equipment, it will import some as long as they can afford it. However, if the company cannot really use it, its technology would go backward even after the import.” Professor Jiang suggests, during the process of overseas M & A, Chinese enterprises must have adequate knowledge and talents at the first place, and then execute sound plans, with an accurate self-positioning.

Contributing to the top think-tank on the aspect of corporate finance

In her spare time, Professor Jiang enjoys versatile hobbies, “I like sports and dancing. I used to dance waltz, cha-cha, rumba, Latin in the States. Girls must work out often so as to keep fit”, she says enthusiastically, “Nowadays I get a little bit lazy, and prefer activities like photography and wine tasting.”

Impressed by SAIF’s rapid growth, she says, “There is an increasing number of staff. SAIF has grown really rapidly. It is exciting, and to be congratulated. As a SAIFer, I believe that my fate is bonded with SAIF, and hope SAIF can grow healthily. SAIF’s mission is to be the top think-tank for Shanghai’s continued growth as an international financial center. I think, apart from capital market research, corporate finance research is also essential for the think-tank. So I hope I can contribute in this regard.”

Professor Jiang is interested in several aspects of corporate finance, including the bond market. “Although Chinese bond market encounters many problems, there are great space and various approaches for its development”, says Professor Jiang, “when it comes to financial innovation research, we usually focus on how to use complex financial instruments. However, I think it also necessary to explore financial solutions, such as regulation - how to regulate the market? What problems does the bond market have? Or viewed from angle of companies, how to reasonably determine its capital structure during financing difficulty, etc. Solving these problems is a way of financial innovation, too. Therefore, I like to find out solutions to the financing challenges for Chinese enterprises.”