Mechanism On The Impact Of Economic Policy Uncertainty On Decisions Of Cross-border Mergers And Acquisitions

Since the global financial crisis in 2008,China's corporates' cross-border M&As have shown a blowout trend.In 2016,the amount of overseas M&As by China's companies has reached US$135.33 billion,with a total of 765 transactions completed.The host country covers 74 countries and regions around the world.Meanwhile,the economic policy uncertainty at home is increasing.General Secretary Xi Jinping pointed out when he met with private entrepreneurs in November 2018,that “Uncertainties have been on the rise,downward pressures have increased and companies have been facing more difficulties”.Inspired by this,we explore the impact factor of corporates' cross-border M&A decisions.We mainly focus on the following two questions:(1)what's the purpose of corporates' growing enthusiasm for overseas M&As,is it out of impact of domestic economic policy uncertainty?(2)do corporates' various growth demands have specific effects on such phenomena?Contents of this paper are threefold.First,the relevant literature of “Motivations of Cross-Border M&As” and “Economic Policy Uncertainty” are reviewed in detail,and the status quo of China's corporates transactions is analyzed as well.Afterward,we distinguish the evolving concepts of “economic policy uncertainty”.Second,this paper sheds light on the specific research by analyzing from the perspective of economic policy uncertainty,and by further discussing the influence of growth demand.Third,this paper selects samples of China A-shared listed corporates from Shanghai and Shenzhen stock markets from 2008 to 2015.We employed Zephyr Global M&A Transaction Database,CSMAR Economic & Financial Research Database,CCER China Economic and Financial Database,and WIND Financial Terminal,to build variables of firm-,industry-,and macro-levels.What's more,we conduct the Tobit model to perform multiple econometric tests like the benchmark model test,the subsample test,and the adjustment effect test.We also use the Heckman two-step method to make a further robustness test to acquire abundant and steady results.The main conclusions are as follows:(1)The stronger the domestic economic policy uncertainty,the more likely it is for corporates to implement cross-border M&A decisions,that is,overseas M&A decisions are influenced by such phenomena;(2)Non-manufacturing enterprises prefer to go abroad;(3)Enterprises prefer to invest in developed and non-Belt and Road countries;(4)Influences of economic policy uncertainty are more obvious among high-demand enterprises;(5)Companies with various life cycles have distinguished degree of influences,those in the growth period and the recession period remain less affected,while those in the mature period remain significant relevant.