Genetic distance and cross-border M&A completion: Evidence from Chinese firms

Abstract

Using data drawn from Chinese firms from 1996 to 2019, we explored the effect of genetic distance on the completion of cross-border merger and acquisition (M&A). We found an inverted U-shaped relationship between genetic distance and cross-border M&A completion. Further research showed that this relationship is moderated by heterogeneity at the firm-, industry-, and country-levels. In particular, when the acquirer is a foreign-listed company and the host country institution is of good quality, genetic distance has a linear positive effect on M&A completion. When the acquirer belongs to the high-tech industry and the two countries involved have not signed any bilateral investment treaties, the effect of genetic distance is not significant. Our study sheds light on the impact of genetic distance on cross-border M&A completion and enriches the related theoretical perspective. Our findings also have a certain practical value.