Impacts of Upward and Downward Institutional Distance on Cross‐Border Acquisition Completion: The Moderating Role of Parent Firm‐Specific Advantages

Qiqi Xu and Lei Wang

The World Economy, 2025, vol. 48, issue 10, 2314-2332

Abstract: Previous studies fail to show the difference between the impacts of upward and downward institutional distances on cross‐border acquisitions (CBAs) because they did not differentiate the directions of institutional distance. From a perspective of asymmetry, this study explores the different effects of upward and downward institutional distance on the completion of the CBAs of Chinese multinational enterprises (MNEs). Employing data of 1343 acquisition deals by Chinese listed multinational enterprises from 2001 to 2020, our empirical results show that upward institutional distance prompts the completion of CBAs; meanwhile, downward institutional distance has a negative but statistically insignificant effect. We also study the moderating effects of political ties and excess control. Political ties are found to positively moderate the effect of downward institutional distance on CBA completion, while excess control strengthens the effects of both upward and downward institutional distances on CBA completion.

Date: 2025
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