Fleeing from systemic risk at home through cross-border acquisitions
ISSN: 1525-383X
Article publication date: 26 January 2023
Issue publication date: 3 August 2023
Abstract
Purpose
Viewing the domestic downside risk as a “pushing” factor for outward foreign direct investment (OFDI), this study aims to examine the surge in Chinese cross-border acquisitions (CBAs) between 2008 and 2017, a unique window when private firms in China were allowed to conduct CBAs.
Design/methodology/approach
This study examines the effect of down-side risk on cross-border acquisition performance by using the sample of Chinese A-share listed companies from 2008 to 2017. Specifically, this study considers three kinds of systemic risk, systematic risk and idiosyncratic risk, and respectively examines their impact on CBAs activities; this study also investigates their subsequent results after CBAs activities. The contingency effect of state ownership on the above relationship is also discussed.
Findings
The findings reveal that pre-CBA systemic risk explains the volume of CBA activities; CBAs are followed by a reduction in systemic risk; the interactions between systemic risk and CBAs decrease with the level of state ownership; and the above results do not hold for traditional risk measures (i.e. systematic risk and idiosyncratic risk).
Originality/value
This study contributes to the literature by revealing the role of systemic risk as a “pushing” factor in the context of OFDI and suggesting an alternative explanation for CBAs from China: Chinese firms (especially private firms) took advantage of the rare opportunity between 2008 and 2017 given by the government to transfer assets overseas through CBA.
Keywords
Acknowledgements
All authors have contributed equally and are listed in alphabetical order. The authors are grateful for the financial support provided by the Center for Business Studies and Innovation in Asia-Pacific at the University of San Francisco, and the funding from the Natural Science Foundation of Zhejiang Province (LQ22G020007), the Humanities and Social Sciences Research Project of the Ministry of Education (22YJC630168) and the Zhejiang University of Technology Humanities and Social Sciences Research Project (SKY-ZX-20210239). The authors appreciate the comments from Peter Buckley, Ping Deng, Minyuan Zhao, Klaus Meyer, Ilan Vertinsky and Ari Van Assche.
Citation
Shao, L., Wang, L., Xie, Z. and Zhou, H. (2023), "Fleeing from systemic risk at home through cross-border acquisitions", Multinational Business Review, Vol. 31 No. 3, pp. 333-361. https://doi.org/10.1108/MBR-02-2022-0026
Publisher
:Emerald Publishing Limited
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