Bilateral geopolitical risk and equity ownership in cross-border mergers and acquisitions by emerging-market firms: Non-market strategies as legitimacy buffers

With deepening international tensions and global disorder, geopolitical risk has become a key factor that multinational enterprises (MNEs) cannot ignore in their internationalisation process. In the context of cross-border mergers and acquisitions (CBM&As), the intensification of bilateral geopolitical risk (BGPR) exposes the firms to tougher legitimacy challenges. This study investigates the impact of BGPR on equity control in CBM&As by MNEs and distinguishes BGPR from global GPR, focusing on the specific interactions between two countries. Using Tobit regression models to analyse CBM&As panel data from Chinese listed companies between 2004 and 2022, this study finds that heightened BGPR leads to reduced equity control by Chinese MNEs, as they adopt strategies to mitigate asymmetric legitimacy penalties. Under the framework of institutional arbitrage, non-market strategies such as cross-listing, corporate reputation, and environmental disclosure are shown to offset the negative effects of BGPR on equity control. This study contributes to the international business literature by refining the categorisation of risks in corporate internationalisation, revealing the strategic use of non-market strategies under geopolitical pressure, and extending ownership strategy theory into the geopolitical context.