A Study On Cross-border M&A Risk Of China's Enterprises

The main cross-border M & As are large state-owned enterprises in China, which focuses on finance and energy industries. Drives, game, value assessment and integration are the general mechanism of cross-border M & As. In the game of cross-border M & A, there exists separating equilibrium, the signals are clear and the risk is avoidable. Sometimes integration is more significant than execution. China's enterprises face three main risks, including political risks, financial risks and integrating risks. Political risks are the "China Threat Theory", host war and policy restrictions; financial risks are pricing risk, financing risk, payment risk and exchange rate risk of RMB; integrating risks are culture integration risk, human resource integration risk and governance integration risk. China's enterprises can choose variety of control methods to enhance the probability of success. Integrating risks are systemic risks, which are endogous and the most significant risks for China's enterpises cross-border M & As.Adopting the Probit Model, we study the factors of financial risks. We can conclude that cash flow of investment activities and financing activities are positive correlation with financial risks, liquidity ratio and the debt-to-asset ratio are negative correlation with financial risks. This reveals that to reduce financial risk of the cross-border M & As, China's enterprises need to maintained cash flow and the solvency at the appropriate level. Based on the theoretical and empirical analyse, from the view of New Institutional Economics paradigm,we should learn the successful experience of Shanghai Automotive Co.,Ltd. controlling the South Korean workers' strike political risk and China Mobile controlling the Paktel financial risk. I discuss strategies of risk aversion to enhance probability of success for China's enterprises.There exist three innovations in the paper. Firstly, we search for sourse of risks from the general mechanism of cross-border risks, and we find signals of M & A are clear and the risks are avoidable. Secondly, using empirical analysis of Probit Model, we explore the impacting factors of financial risks. Thirdly, according to path dependence, transaction costs and system change, we study three cases.