Risk hedging: How geopolitical risks affect enterprises' overseas merger and acquisition?

Heting Zhang and Lin Tian

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: Geopolitical risk profoundly impacts business decision-making in international expansion by interrupting market access, distorting resource allocation, and increasing regulatory uncertainty, consequently necessitating strategic value chain restructuring through cross-border acquisitions. This analysis analyzes Chinese A-share listed companies from 2013 to 2023, demonstrating that increasing geopolitical concerns systematically drive offshore M&A operations as a risk-hedging strategy. The empirical evidence reveals two mediating pathways: (1) increased financing constraints that compel firms to circumvent domestic credit limitations by utilizing internal resources, and (2) diminished total factor productivity that prompts efficiency-driven acquisitions in geopolitically stable markets. Further, non state-owned enterprises and higher competitive industry have more pronounced effects.

Keywords: Geopolitical risks; Overseas M&A; Risk hedging effects (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025004599

DOI: 10.1016/j.iref.2025.104296

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