Cultural Differences,Ownership And Chinese Enterprises' Cross-border M&A Performance

With the deepening trend of the global economic integration,cross-border mergers and acquisitions(M&A)have gradually become an important way for Chinese enterprises to integrate international resources and enhance their influence.However,the soaring trend of China's cross-border M&A and unfavorable results puzzled both business professionals and academia.The case of cross-border M&A failures of famous companies such as Lenovo is even more thought-provoking.Therefore,this study wants to focus on the impact of cultural differences on the performance of Chinese companies' cross-border M&A through empirical research.On this basis,examining how enterprises' ownership moderate this relationship.Existing research has recognized critical roles played by cultural differences and ownership in China's cross-border M&A,but the results are mixed even contradictory.Some research concludes after empirical research that cultural differences have positive effects on cross-border M&A performance;State ownership enterprises(SOEs)have better performance than private ownership enterprises(POEs).Conversely,some researchers suggest cultural differences are negatively associated with cross-border M&A performance;SOEs have a worse performance than POEs.However,few writers can focus on how enterprises ownership influences the relationship between cultural differences and cross-border M&A performance.This study analyzes the reasons why cultural differences have negative,positive and non-significant effects on cross-border M&A performance from a theoretical perspective,and then sorts out the two theories of the "supporting hand" and "grabbing hand" of the existing literature about the influence of governments on enterprises.These two theories seem to be conflicted with each other,but in fact,governments have both "supporting hand" and "grabbing hand" for enterprises.Hence this study expects the greater cultural differences between China and the target country,the worse results will be performed.Moreover,enterprises ownership moderates the negative relationship between cultural differences and cross-border M&A performance;The ownership nature of SOEs weakens the negative effect of cultural differences on M&A performance.To test this relation,this study uses sample event from the listed Chinese companies completed their cross-border M&A during 2010-2016.Regression model is constructed by M&A performance as an independent variable,culture differences as a dependent variable and ownership as a moderator.The difference of Tobin's Q between one year before the acquisition and one year after the acquisition is used to measure M&A performance,and Hofstede theory is used to calculated culture differences.In conclusion,introducing the former acquisitions experience,relatedness,firm size,financial leverage and acquisitions year the regression model as control variables,and this study identifies a negative and significant association between cultural differences and cross-border M&A performance.The second major finding is that the interaction term and cross-border M&A performance are positively and significantly associated.It implies that SOEs can weaken the negative effect of cultural differences on M&A performance.At last,according to the result,this paper puts forward corresponding policy recommendations from the government and enterprise levels,hoping to improve Chinese enterprises' cross-border M&A performance.This study contributes to current research in the following ways.First,previous cross-border M&A studies focus on the developed countries and mature markets,while this study examines cross-border performance using a Chinese dataset.This study Expanded research areas.In addition,state ownership is introduced as a moderator.This illustrates the mixed results between cultural difference and cross-border M&A performance and sheds light on the mechanisms about how governments affect this relationship.