Greenfield or M&A? The Role of Economic Policy Uncertainty in Home and Host Countries

Tiezhu Sun, Weiwei Zhang, Xiaobo Xu and Li Zhang

Emerging Markets Finance and Trade, 2021, vol. 57, issue 6, 1628-1639

Abstract: This paper examines the impact of economic policy uncertainty in home and host countries on the choice of foreign establishment mode. Using 777 foreign subsidiary establishments made by Chinese firms from 2004 to 2015, we find that firms prefer M&A compared to greenfield investment as the establishment mode when the host country is experiencing high economic policy uncertainty. Firms that face high economic policy uncertainty in their home country prefer cross-border M&A when entering the host country. Economy policy uncertainty in the home country is the main factor when economic policy uncertainties in both the home and host countries are considered.

Date: 2021
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DOI: 10.1080/1540496X.2021.1897003

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