Rent‐seeking or value‐creating? The impact of managerial autonomy from state‐built corporate pyramids on M&A performance

How to give managers autonomy to improve organisational performance has long been a focus of business practice. In this paper, we use a unique Chinese context to investigate the effect of managerial autonomy arising from state‐built corporate pyramids on mergers and acquisitions (M&A) performance. We find that the number of pyramidal layers between the government and the state‐owned enterprise (SOE) is positively associated with M&A performance. This relationship is stronger when the SOE managers possess professional M&A abilities but weaker when the SOE management team and the government are politically connected. We attribute the positive association to the career path incentives of SOE managers. Additionally, we address the role of managerial autonomy in the M&A process and integration. We also analyse this effect in contexts where managerial autonomy is crucial in some investment decisions. Taken together, our study fills a critical gap on managerial discretion within internal organisational contexts.