Research On The Impact Of Institutional Distance On The Location Selection Of Cross-border Mergers And Acquisitions Of Chinese Enterprise

The 21 st century is an era of full flow of global production factors and frequent trade exchanges.Under the guidance of the national "going out" policy and other policies,Chinese enterprises actively go abroad to carry out cross-border mergers and acquisitions.As more and more domestic enterprises "go out",location choice has become an issue that enterprises need to consider.Due to differences in economic development level,resource endowment and institutional environment among countries,Chinese enterprises will face different investment environment when choosing which country or region to implement cross-border M&A,which plays a key role in the success or failure of cross-border M&A.The location distribution of transnational mergers and acquisitions of Chinese enterprises is not balanced,and the reason is that institutional distance can not be ignored.Institutional distance refers to the political,economic and legal gap between two countries,which may cause Chinese enterprises to face risks such as the increase of investment cost and the increase of investment risk in cross-border mergers and acquisitions.Therefore,Chinese enterprises should pay attention to the influence of institutional distance on the location choice of cross-border M&A to improve the success rate of M&A.This paper focuses on the influence of institutional distance on the location choice of Chinese enterprises in cross-border mergers and acquisitions.By sorting out the relevant contents of institutional distance,six institutional distance indicators are established,namely,public discourse power and accountability system,political stability and the elimination of violence and terrorism,government efficiency,supervision quality,rule of law level and corruption control.First,this paper makes a qualitative analysis of 6405 cases of Chinese enterprises’ cross-border mergers and acquisitions from 1984 to 2021,and summarizes the current location distribution,characteristics and existing problems of Chinese enterprises’ cross-border mergers and acquisitions.Secondly,on the basis of theoretical research and qualitative analysis,based on 5,941 cases and institutional distance index data of 135 countries or regions from 2002 to 2021,this paper constructs a fixed effect model for empirical analysis.According to the empirical results,among the six indicators to measure institutional distance,only the quality of supervision is positively correlated with the number of cross-border mergers and acquisitions of Chinese enterprises,which is inconsistent with the expected hypothesis.The other five indicators are consistent with the hypothesis,that is,they are negatively correlated with the number of cross-border mergers and acquisitions of Chinese enterprises.Then,this paper introduces the case of Alibaba choosing to co-build e WTP platform with Africa,and analyzes how institutional distance affects the location choice of the enterprise in Africa.Finally,based on theory,demonstration and case study,this paper puts forward countermeasures and suggestions for the location choice of Chinese enterprises in cross-border M&A from the perspective of government and enterprises.