Geographic Distance And M&A Success Rate

In the background of actively promoted industrial integration,Mergers and Acquisitions(M&A)have become one of the most effective ways for region and scale expansion of companies.However,there are certain risks in M&A,for instance,termination,high premium and integration difficulties after the completion of M&A,appearing frequently in recent years.Among the factors that affect the success rate,information asymmetry is a focus in academia.In existing domestic and foreign studies,the distance between acquirers and targets has been used as a proxy for information asymmetry.Although the development of the technology and Internet has greatly narrowed the gap between the two sides of transaction,the information asymmetry caused by the geographical distance still exist.The relevant literature concerning geographic distance and M&A focused on the influence of geographic distance on the cross-border M&A success rate.Only few studies about distance and domestic M&A focused on whether there was a local preference in the domestic M&A market and the influence of geographic distance on the market reaction and long-term performance of acquirers,ignoring the direct impact of geographic distance on domestic M&A success rate.Thus it can be senn that the exploration of the relationship between geographic distance and M&A success rate is of theoretical and practical significances.To address the relationship between geographic distance and M&A success rate,firstly,the paper uses the logit model to test the impact of geographic distance on the domestic M&A success rate in the period from 2004 to 2015.The results suggest that geographic distance correlates negatively the M&A success rate,that is,the further is the distance between the two sides,the lower is the M&A success rate.Furtherly,in order to verify the situation in which the negative relationship occurs,the paper also examines whether the influence of distance on M&A success rate is various when the targets'information transparency and acquirers' nature of property rights.It is found that the negative correlation is significant when targets are in the poor market environment and when the relatively scale of the target to the acquirer is large.However,no matter the acquirer is state-owned company or privately-owned company,the negative correlation both exist.This paper not only enriches the related research of information asymmetry,geographic distance and M&A,but also has some practical significance.In the cases of long-distance M&A,the transaction parties and regulators should fully understand the cost of the information collection,the cultural and institutional conflicts caused by the geographic distance,and also the potential impact of these factors on M&A results.