Industrial Policy’s Effect on Cross-Border Mergers’ Decisions—Theoretical and Empirical Analysis

Abstract

To explore the relationship between industrial policy and cross-border M&As in Chinese enterprises, the PSM method and a two-way fixed model were used. Using a sample of A-share listed companies during the period 2005–2019, we theoretically and empirically analyzed the mediating role of financial constraints and the moderating role of political connections between the companies. It was found that industrial policy has a significant positive effect on cross-border M&As and that firms’ financial constraints mediate the relationship between industrial policy and M&As. Political connections moderate the relationship between industrial policy and M&As. This study enriches the research on the relationship between industrial policy and firms’ M&A decisions from a micro perspective, and provides evidence of industrial policy promoting cross-border M&As through alleviating the financial constraints of the firms.