Institution Distance,Culture Differences And Short-term Market Reaction Of Chinese Overseas M&A Decision

Recently,with the continuous advance of "One Belt And One Road" strategy put forward by president Xi Jingping.Chinese enterprises overseas M&A gradually active on the world stage.Total number of overseas M&A cases throughout the year is up from 2013 in 112 to 2015 in 222.it is expected to rise in the future.Chinese enterprises hope to perfect industrial chain,reduce production cost,or obtain resources,realize complementary,or release excessive production capacity,reduce production stress,or make the international first-class brand,realize the brand advantage,reach the company's own management synergy,create value for the enterprise through overseas M&A.However,the road of Chinese enterprises overseas M&A is not plain sailing,it will be influenced by a variety of potential factors in the whole process of M&A.Do overseas M&A create value for our country enterprises?Foreign scholars have done a lot of empirical and theoretical research,But there is no consistent conclusion.Some studies have shown that overseas M&A create value for enterprises,that bring positive cumulative abnormal returns.Some studies have shown that overseas M&A bring negative cumulative abnormal returns for enterprises or there is no relationship between them.China's stock market is quite different with foreign countries,foreign empirical research adopt foreign enterprise data.Recently,many domestic scholars used cases and empirical research to study Chinese enterprises overseas M&A.Through the literature review,we found that the existing research used a smaller number of samples,the influencing factors were from the level of industry and enterprise,there are few system research study overseas M&A were from the national level.We collected the data of Chinese overseas M&A about 310 events from 2009 to 2015.We enriched sample size,widen industry and regional distributed.Firstly,using the event study to analysis the short-term market reaction before and after overseas M&A announcement,whether create value to enterprises.Secondly,on the basis of event study,multivariate regression model are set up to analyze institutional distance and cultural difference.At the same time,we use the state ownership proportion of Chinese enterprises' actual controller measure the close relationship between government and enterprises,and analyze the moderating effect to institutional distance and cultural difference.The event study find that the decision of overseas M&A bring positive cumulative abnormal return for the enterprises.before and after the announcement about 21 days average cumulative abnormal return is 3.4%.it suggests that investors and market give positive comments to the Chinese enterprises overseas M&A that is still the strategic choice for Chinese enterprises "going out".Regression results show that the smaller the institutional distance and the cultural difference between the China and the host country,the higher the cumulative abnormal returns during the announcement of overseas M&A.the higher the state ownership proportion of Chinese enterprises' actual controller,the higher the cumulative abnormal returns during the announcement of overseas M&A.The state ownership nature of Chinese enterprises' actual controller has a moderating effect on the negative effect of the institutional distance to the cumulative abnormal returns.Combining with the results of the empirical study,This paper puts forward the following suggestions.In overseas M&A,Chinese enterprises should be analyzed and evaluated its own conditions and target enterprise,strengthen the construction of professional talent team,Consider target enterprise investment environment in host countries,thorough understand the national culture and corporate culture differences,carefully choose acquisition object.The government should consolidate and develop the friendly exchanges with other countries,perfect the relevant laws and policies of overseas M&A.Using its convenient to provide information timely to Chinese enterprises.Investors should be careful analysis information about overseas M&A.Don't blindly follow the crowd.