Does the Pricing of Intra-Group Investment Deviate from the Market Rule? Evidence from Domestic Merger and Acquisition Transactions Under Common Control in China

This article examines whether the pricing of intra-group investment deviates from the market rule using the data of domestic merger and acquisition (M&A) transactions under common control in China. It finds that M&A transactions under common control pay a lower premium than that without common control, which uses market rules to price. This is because acquirers in M&A transactions under common control face a lower degree of information asymmetry than those in M&A transactions without common control. Moreover, this paper further examines the economic consequences of internal investment behavior from multiple dimensions. It finds that compared with the acquirers in M&A transactions without common control, the acquirers in M&A transactions under common control have lower performance in market, finance, and innovation. This article complements the research gap in the field of internal investment of groups and deepens our understanding of investment pricing in internal capital markets