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Distance and the completion of Chinese cross-border mergers and acquisitions

Lookup NU author(s): Dr Xin Li

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Abstract

PurposeThe purpose of this paper is to draw attention to the significant lower completion rate of mergers and acquisitions (M&As) by firms from emerging economies (EEs) (China in particular) compared with firms from advanced economies, and identify the country- and industry-level factors that affect the completion of cross-border M&As by Chinese firms.Design/methodology/approachThis study explores the effects of economic, cultural and institutional distances and target firms in technology- and knowledge-intensive industries on the completion of cross-border M&As by Chinese firms. It also examines the interplay between distance factors and technology- and knowledge-intensive industries on cross-border M&A completion. This study adopts a quantitative approach and is based on a sample of 768 announced cross-border M&A deals by firms in China between 2000 and 2015.FindingsThe results indicate that economic distance increases the likelihood of the completion of cross-border M&As when the target is in a more developed economy than China, but decreases when the target is in a less developed economy. Cultural and institutional distances have a significant, negative impact on the completion of cross-border M&As. In addition, target technology-intensive industries have a significant direct negative effect on cross-border M&A completion and moderate the relationship between the distance factors and the likelihood of cross-border M&A completion.Research limitations/implicationsThe results reveal factors that affect the completion of cross-border M&As by emerging market firms (EMFs). Further research, however, is needed to discover how distance factors affect how EMFs find, evaluate and negotiate international bids. To broaden the scope of the research, data for firms from other EEs would also be required.Originality/valueThe study expands the literature that considers the effects of major distances on cross-border M&A completion. In addition, the importance of defining and measuring distances in the context of cross-border M&As is highlighted. Finally, the study expands knowledge on how cross-border M&As affect the internationalization strategies of EMFs by conceptualizing and testing how target industries affect cross-border M&A completion.


Publication metadata

Author(s): Dong L, Li X, McDonald F, Xie J

Publication type: Article

Publication status: Published

Journal: Baltic Journal of Management

Year: 2019

Volume: 14

Issue: 3

Pages: 500-519

Online publication date: 01/07/2019

Acceptance date: 29/03/2019

ISSN (print): 1746-5265

ISSN (electronic): 1746-5273

Publisher: Emerald Publishing Limited

URL: https://doi.org/10.1108/BJM-06-2018-0223

DOI: 10.1108/BJM-06-2018-0223


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