Politics, culture and M&As’ transaction completion

Shi Li and Shizhong Huang

Nankai Business Review International, 2018, vol. 9, issue 3, 264-288

Abstract: Purpose - Mergers and acquisitions (M&As) dominated by Chinese enterprises have become increasingly conspicuous and prevalent in recent years. However, many of them were obstructed by foreign governments on the ground of “Threating National Security”. Overseas acquisition is a crucial step of Chinese Government’s “Going-Out” strategy, so analyzing the attribution of its success and failure is very important. Design/methodology/approach - This paper adopts empirical study method to analyze the factors from political and cultural perspectives based on a sample of 327 cross-border M&A transactions made by all listed companies in China from 1997 to 2010. Findings - The result shows higher failure rate for those acquisition targets which could be classified as political sensitive assets; meanwhile, positive diplomatic relations and higher bilateral trust between China and the host country will facilitate the M&A transaction. Originality/value - This paper offers a new research angle on cross-border M&As, which is the impact of culture factors, as well as diplomatic relationship, bilateral trust and war history between China and the host country on M&A transactions. This paper also constructs several ways of measuring the diplomatic relationship between countries.

Keywords: Cross-border M&As; Culture and corporate finance; Political sensitive assets (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:nbripp:nbri-05-2017-0023

DOI: 10.1108/NBRI-05-2017-0023

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