On September 26, 2025, the Center for the Study of Contemporary China hosted Prof. Muyang Zhang from the Shanghai University of Finance and Economics for a seminar titled “Bureaucratic Redundancy and Firms’ M&A Decisions: Evidence from China.”
Prof. Zhang’s seminar examined how government size and administrative inefficiencies influence firms’ strategic behavior, particularly in the context of mergers and acquisitions (M&As). Drawing on the concept of bureaucratic redundancy—the excess of public employment relative to economic needs—he introduced a novel empirical measure that captures the imbalance between public-sector expansion and economic growth across Chinese provinces.
Based on a panel of 4,755 M&A transactions between 2010 and 2020, his analysis revealed that firms headquartered in provinces with higher bureaucratic redundancy are significantly more likely to acquire targets in other provinces. A one-unit increase in the redundancy index corresponds to roughly a four-percentage-point rise in the likelihood of cross-province acquisitions. These firms tend to prefer cash-based deals and target regions with lower bureaucratic redundancy, achieving superior post-merger performance.
The event concluded with a lively discussion among the audience on the empirical implementation of their bureaucratic redundancy measures, and on how one can separately identify the role bureaucratic redundancy from the differential growth trajectories across regions.
This seminar was part of the Economics Seminar Series sponsored by the Center for the Study of Contemporary China.
