A Study On The Effects Of Genetic Distance On The Sclae Of Cross-border Mergers And Acquisitions

With the deepening of global economic integration,economic exchanges between countries have become increasingly close.The cross-border mergers and acquisitions have become an important form of foreign investment.Giving to China's rising status in the world economy and the support of relevant national policies,China's enterprises are facing new opportunities and challenges in the implementation of the 'going out'strategy.Therefore,it is particularly important to correctly guide the development of cross-border M&A activities of Chinese enterprises.The genetic distance between countries represents the differences in their cultural characteristics such as concepts,practices,habits,traditions,customs,etc.Foreign researchers use genetic distance instead of cultural distance and institutional distance to join the economic research,but domestic attention to the genetic distance is not high,and research about it is relatively scarce.Therefore,this paper explores the influence mechanism of genetic distance on the scale of cross-border mergers and acquisitions,and based on the improved M&A gravity model,using the M&A data of 45 countries in the world from 2007 to 2016,using the multiple linear regression test to test the inheritance.The empirical results show that the distance between the M&A countries and the target countries is an important factor affecting the scale of M&A between the two countries.The increase in genetic distance between the two countries will decrease the scale of M&A transactions between them.The result has been repeatedly proven to be robust in the empirical test,endogenous test,robustness test and heterogeneity study;Second,the economic development level of the target country has a significant positive effect to the scale of cross-board M&A,and as the level of economic development of the target country becomes higher,it can weaken the negative effect of genetic distance on the scale of mergers and acquisitions;third,the geographical distance between the M&A country and the target country will still inhibit the scale of cross-border mergers and acquisitions between countries.Therefore,China should pay attention to the following three points in the formulation of future cross-border M&Apolicies:First,in formulating corporate overseas mergers and acquisitions and attracting foreign investment,it is necessary to fully consider the impact of genetic distance on cooperates' mergers and acquisitions: for Chinese companies Mergers and acquisitions,China can encourage them to look for the underlying assets of countries with a small genetic distance between China,which will reduce the additional costs in the process of mergers and acquisitions and improve the synergies after the merger;for foreign companies to acquire Chinese underlying assets,China can promote Chinese companies' trade with countries of small genetic distances between China,and it will increase the probability of success in mergers and acquisitions,so it means we should cooperate with Southeast and East Asian countries more,and on the basis of friendly consultations with African and South American countries,we should also be alert to the risk of cultural differences arising from genetic distance.Then,while encouraging enterprises to go abroad for mergers and acquisitions,they should also guide enterprises to pay attention to the economic development level of the target countries and be alert to their macroeconomic risks.Moreover,in order to attract foreign investment more effectively in China,China still needs to further emphasize the importance of economic development.So,in the economic exchanges between Chinese enterprises and European and North American countries,even if the genetic distance between China and their countries is medium,their regulated market mechanisms and security systems can reduce the uncertainty of economic activities,and enterprises should still be encouraged to communicate with them.Finally,we should also strengthen the vigilance of the negative effects of geographical distance,and vigorously build and optimize the transportation network between countries to save transaction costs.