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 study examines whether the pricing of intra-group investment deviates from market rules using data on domestic merger and acquisition (M&A) transactions under common control in China. It was found that M&A transactions under common control involve a lower premium than those without common control, which rely on market rules to set a 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 study explores the economic consequences of internal investment behavior from multiple angles. It was found that compared with acquirers in M&A transactions without common control, acquirers in M&A transactions under common control have lower performance in the market, finance, and innovation. This study addresses the research gap on the internal investments of groups and deepens our understanding of investment pricing in internal capital markets.