The influence of national distance on cross-border M&A deal completion

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While cross-border mergers and acquisitions (CBM&As) deals involving Chinese companies have been increasing in recent years, a high percentage of these deals fail before completion. This failure rate is much higher compared to deals from other BRIC countries. In the international business literature, (national) culture is among the usual suspects to blame for ruining an M&A deal. However, prior studies have mostly focused on its impact on post-deal performance and have failed to address the possible complications of national culture in the pre-completion stage of the M&A process. This study examines the influence of national cultural distance on the likelihood of Chinese CBM&A deal completion. Additionally, the study investigates how prior experience in CBM&A moderates the effect of these cultural differences. The hypotheses are tested using a sample of 790 announced CBM&A deals from China during the period of 2001-2016. The main finding of this study is contradictory. Greater cultural differences between home and host country increase the likelihood of deal completion. The results also indicate that not every component of national culture may be of equal influence during the pre-completion procedure of Chinese companies. In addition, the study fails to find any empirical evidence for the moderating effect of prior experience.
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