The Influence Of Host Country’s Country Risk On Performance Of Cross-border Mergers And Acquisitions By Chinese Listed Companies

With the development of Chinese enterprises, China’s cross-border mergers and acquisitions gradually occupy a certain position in the global mergers and acquisitions(M&A)wave. The rapid development of cross-border M&A practice make the research of cross-border M&A become a hot academic topic. The difference between cross-border M&A and domestic M&A is that cross-border M&A are related to two countries, therefore, cross-border M&A not only face ordinary business risk, but also are affected by host country risk. Host country risk influences the result of deal before M&A and operating performance after M&A, Chinese enterprises’ practice also confirms this, some failed cross-border M&A cases make people start to pay attention to the impact of country risk. Many scholars in China have studied the performance and the influence factors of cross-border M&A, which are related to some aspects of country risk, but in general, there is little empirical research, and no systematic study of the relationship between the country risk and the performance of cross-border M&A, this field needs to be improved. Therefore, this paper studies the impact of host country’s country risk on the short-term and long-term performance of acquiring firms in cross-border M&A, and explores the impact of financial risk, economic risk and political risk on the short-term and long-term performance of cross-border M & A.In this paper, from theoretical and empirical perspectives, we explore the impact of host country comprehensive risk, political risk, financial risk, economic risk on short-term performance and long-term performance of acquiring firms in cross-border M&A. Using the event study method to measure short-term performance and accounting index method to measure long-term performance, we get the following conclusions:1.The country risk is negative with the short-term performance of cross-border M&A. Using cumulative abnormal return(CAR) measuring short-term performance, the country comprehensive risk and short-term performance is negatively related, the result of financial risk and economic risk is the same as the country comprehensive risk, showing that when the financial risk and economic risk is lower, the market performance is better. But the relationship between political risk and short-term performance is not significant.2.Country risk and long-term performance of cross-border M&A has a significantly negative correlation. It is found that in the long term, the comprehensive risk and long-term performance are negatively related, that is, the higher the country comprehensive risk, the worse the long-term performance. The relationship between economic risk, financial risk and long-term performance is also significantly negative. It indicates that when the target is located in countries with lower risk, the acquiring firm can get better long-term performance. However, there is no significant correlation between political risk and long-term performance.The innovation points and academic contributions of this paper are mainly in the following two aspects:1. This paper not only examines the relationship of host country comprehensive risk and acquiring firms’ cross-border M&A performance, furthermore, we analyze the impact of political risk, economic risk, financial risk on cross-border M&A performance.2. The influence of country risk on the performance of cross-border M&A is not only in the M&A process, but also affect the long-term performance of M&A enterprises. Previous articles only study the short-term performance or long-term performance, we investigate two aspects, the impact of country risk on short-term and long-term performance.