Host Country Political Risk and Chinese Firms’ Cross-border M&A Performance

Abstract

This paper uses 341 cross-border M&A activities by 214 Chinese listed companies during 2006 to 2016 to study the connections between host countries’ political risk index and the growth value of total factor productivity (TFP) before and after the M&A. Through principal component analysis and random effect panel data regression, the results show the host country’s political investment environment and internal political conflicts have significant influence on M&A performance enhancement. At the enterprise level, the results of this paper can provide a theoretical basis for future Chinese companies to implement cross-border mergers and acquisitions, and improve both M&A success rate and performance. We believe our research also provide guidance for the government to formulate foreign investment policies and optimize resource allocation.