The Influences of Host Country Risks on the Performance of Chinese Listed Companies in the Cross-border M&As

Hu Jiewu; Han Li

doi:doi:10.16538/j.cnki.fem.2017.09.009

Abstract

The host country risks are important factors influencing the performance of cross-border M&As. Based on the 141 cases of Chinese listed companies from 2006 to 2013, for the first time this paper makes a research on the relation between the host country risks and the performance of Chinese list companies after their cross-border M&As by using the event study and accounting index method. This paper indicates that the host country’s aggregate risk is negatively related with the acquirer’s short-term and long-term performance, and financial risk and economical risk have the same effects, but the effects on the long-term performance decay from significant to non-significant as time goes on. The political risk is not related with the acquirer’s short-term and long-term performance significantly. The cause of the difference is that the political risk evaluated by the west has many defects in the analysis of the risk root course, the identification of assessment scope, and the selection of risk indicators. It is too qualitative and subjective, and does not consider diplomatic relations as political risk buffer, so it is not suitable for Chinese companies. But the evaluation indexes used by economical risk and financial risk are objective and quantitative and evaluation indexes and their evaluation conclusions also apply to China. This paper provides new thoughts and methods for country risk control in cross-border M&As, especially for political risk control, and is beneficial for Chinese enterprise to go abroad better and faster.