The relevance of bilateral political relations between countries for the completion stage premium of cross-border mergers and acquisitions
Cross Cultural & Strategic Management
ISSN: 2059-5794
Article publication date: 25 February 2022
Issue publication date: 22 March 2022
Abstract
Purpose
The purpose of this paper is to examine the influence of bilateral political relations on the completion stage premium of cross-border mergers and acquisitions(CSPCMA) and the moderating roles of cultural distance, trade openness and the nature of firm ownership for this relationship.
Design/methodology/approach
Based on a sample of 401 cross-border mergers and acquisitions (M&A) conducted by Chinese companies from 1995 to 2019 in the Statistical Data Center (SDC), this article used weighted least squares (WLS) to empirically test the impact of bilateral political relations between countries on the CSPCMA.
Findings
The better the target country of entry’s bilateral political relations with China, the lower the premium of the transaction price paid by Chinese companies at the completion stage of cross-border M&A. Among the moderators, the study found cultural distance positively moderates the relationship between bilateral political relations between countries and CSPCMA. The degree of trade openness of the target country negatively moderates the relationship between bilateral political relations between countries and CSPCMA. The negative relationship between bilateral political relations between countries and CSPCMA is stronger when the acquirer is a state-owned enterprise (SOE).
Originality/value
The findings of this study not only add to the knowledge about the relationship between bilateral political relations and corporate cross-border M&A premiums, but also have managerial implications for Chinese corporate managers to sustainably reduce corporate cross-border M&A premiums.
Keywords
Acknowledgements
This study is supported by research grants (NSFC: 72062006, 71972056, 71974039; NSF of Guangxi: 2019JJB180009; NSF of Guangdong: 2020A1515011036; Guangxi philosophy and social science planning project: 20FGL013; Postgraduate Innovation Project 2021 of School of Economics and Management, Guangxi Normal University: JG2021013; the University Innovation Team Project of Guangdong Province in 2021 (2021WCXTD013)).
Citation
Ding, Z., Hu, M. and Huang, S. (2022), "The relevance of bilateral political relations between countries for the completion stage premium of cross-border mergers and acquisitions", Cross Cultural & Strategic Management, Vol. 29 No. 2, pp. 403-426. https://doi.org/10.1108/CCSM-09-2021-0173
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited