Determinants of cross-border mergers and acquisitions by Chinese and Russian firms: A multi-level analysis

Abstract

Amazed by the rapid internationalization and extensive foreign expansion of emerging market firms in the early-2000s and due to a clear trend towards sociocultural and institutional theories, scholars have started to investigate the phenomenon of the internationalization of emerging market firms. The purpose of this study is to identify the determinants of mergers and acquisitions of emerging market firms, as well as how corruption and other institutional factors affect the abandonment of cross-border acquisitions. We examine a sample of 538 cross-border M&A deals of firms from two emerging countries – China and Russia – during the period from January 2002 to December 2012. Based upon institutional and sociocultural theories, we have developed a binomial and a linear regression model that draws attention to the quality of host country institutions with a focus on host country corruption and firm revenue, including their impact on M&A deals across various industries. We find that host country institutions have a strong impact on the abandoned cross-border M&A deal rate of emerging market firms. However, the proposed corruption argument clearly does not hold and needs to be rejected. It can also be concluded that industries matter and have different impacts - some very strong, others less so - on the internationalization of emerging market firms. In both cases, large cross-border M&A deal abandonments can be observed in the metallurgical industry. Finally, it can also be concluded that Chinese multinational firms with large revenues are engaged in larger cross-border acquisition deals than those with smaller revenues.