Success in cross-border M&A deals: can ESG performance be a countervailing force against political risk?

Abay Mulatu and Boying Xu

Economics and Business Letters, 2025, vol. 14, issue 3, 146-155

Abstract: This paper explores how acquiring firms from emerging markets can mitigate political-risk concerns from host countries in Cross-Border Mergers & Acquisitions (CBM & As) deals by leveraging their Environmental, Social, and Governance (ESG) practices. Utilizing data from Chinese CBM & As activities from 2010 to 2018, we find that while relative political risk concerns deter deal completion rate, higher ESG standards of acquirer firms reduce this deterrence effect. The results remain robust to considering ‘duration of deal completion’ as an alternative variable and when splitting the target sample countries into developed and emerging economies. The key conclusion is that emerging market multinational companies can effectively employ ESG as a strategic tool for internationalisation, enabling them to overcome some of the inherent ‘liabilities of origin’.

Date: 2025
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