Intellectual Property Rights Protection and Mergers and Acquisitions : Evidence from China

Using experimental and non-experimental methods, this paper verifies the causal effect of intellectual property rights (IPR) protection on mergers and acquisitions (M&As). Based on cross-provincial data within China, we document a significant increase in the probability of announcing M&A bids in provinces with well-protected IPR. That is, IPR has an impact on M&As in provinces that have more efficient IPR enforcement and better judicial protection. The result is robust to a battery of robustness checks. In addition, better IPR protection at the provincial level allows firms to initiate more cash-financed M&A bids and local bids. Our results suggest that increasing R&D expenditures and alleviating financing constraints are the possible mechanisms through which IPR protection affects the probability of M&As