Chinese SOEs and the Completion of Cross-border M&As: The Moderating Role of M&A Experience

Abstract

Purpose – The purpose of this study is to investigate the relationships among Chinese state-owned enterprises (SOEs), previous M&A experience, and the probability of deal completion in cross-border mergers and acquisitions (CBMAs). Since Chinese SOEs tend to be recognized by host countries as agents of their home country government, this study argues that SOEs will face difficulties in completing CBMA deals. However, the study expects that these difficulties may vary depending on whether the firm has previous M&A experience because firms can gain the knowledge and capabilities necessary to implement subsequent M&As successfully from past M&A experience. Design/methodology – To investigate our argument, we conduct a logistic regression using a sample of 363 CBMA deals from 304 Chinese publicly listed firms during 2007 to 2017. We used SOEs as an independent variable, experience of domestic and foreign M&As as moderating variables, respectively, and CBMA deal completion as the dependent variable. Findings – The study shows a negative and significant relationship between Chinese SOEs and the completion likelihood of CBMA deals. We find that this negative relationship is strengthened when the firm had prior domestic M&A experience, whereas foreign M&A experience alleviated the negative relationship. Originality/value – The issue of government ownership has remained unclear since government intervention has both advantages and disadvantages in pursuing CBMAs. Our findings support literature that argues Chinese SOEs face legitimacy concerns in the host countries, thereby lowering their CBMA deal completion likelihood. Furthermore, the study enriches the literature by identifying different moderating effects of domestic and foreign M&A experience on the negative relationship between SOEs and CBMA deal completion.