The Influence Of Institutional Distance On The Cross-Border M&A Performance Of Chinese Listed Firms

Cross-border M&A has long been used as an important strategy for firms’ international strategic expansion.It is a fast and direct way for firms in one country to acquire advanced strategic assets in another country in order to improve their competitive advantage.Thus,cross-border M&A has become an increasingly important approach utilized by a large number of firms in multiple regions across the globe.Under the support of the government’s “Going Out”and “One Belt,One Road” policies,many firms have joined the wave of cross-border M&A.The number and amount of cross-border M&A have increased year by year,but not many successful cases,most firms have suffered a negative performance after cross-border M&A.Different from domestic M&A,firms are not familiar with overseas business environment,they know little about the host country’s institutional environment,and cross-border M&A has much higher risks than domestic M&A,so institutional distance is the main reason for the decline of cross-border M&A performance.On the basis of institutional theory,this article divides the institution into formal institution and informal institution,and then discusses based on external disadvantage theory and empirical learning theory:(1)Whether the formal institutional distance and the informal institutional distance will negatively affect cross-border M&A performance;(2)As a moderator variable,whether the cross-border M&A experience will weaken the negative correlation between those two types of institutional distance and cross-border M&A performance.To verify whether the discussion is right,this paper selects 110 cross-border M&A samples in Chinese listed firms from 2011 to 2014 at the Zdatabase,and uses SPSS22.0 software to perform regression analysis.The types of variables involved in the regression analysis are control variables,moderator variables,explanatory variables and explained variables.Through literature review,this paper adopts the accounting research method as a measure of cross-border M&A performance,uses factor analysis to calculate the formal institutional distance between China and the host country,and uses Hofstede’s cultural distance formula to calculate the informal institutional distance between China and the host country.Through empirical analysis,the main conclusions of this paper are:(1)The negativecorrelation between formal institutional distance and cross-border M&A performance is not significant,but if the acquired side belongs to sensitive industry,formal institutional distance is significantly negative effect on cross-border M&A performance;(2)There is a significant negative correlation between informal institutional distance and cross-border M&A performance;(3)When the acquired side belongs to sensitive industry,cross-border M&A experience can weaken the negative correlation between formal institutional distance and cross-border M&A performance;(4)Cross-border M&A experience can weaken the negative correlation between informal institutional distance and cross-border M&A performance.Since 2009,the number of cross-border M&A by Chinese firms has risen sharply,and the academic research has also gradually increased.Therefore,this paper that from the institutional perspective can enrich academic research in this area.If the listed firms in our country can take note of the risks brought about by the institutional distance,and strengthen the learning of experience in the cross-border M&A process,especially the indirect experiences,can reduce the impact of institutional distance on cross-border M&A performance,and then improve international competitiveness.