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From connect to conquer: capital market liberalization and Chinese firms' cross-border mergers and acquisitions

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  • Jiang, Mobing
  • Chen, Xinyu
  • Xiao, Mingyue
  • Zhang, Yuning
  • Wen, Wu
  • Chen, Xiaohua

Abstract

This paper exploits the Stock Connect scheme as a quasi-natural experiment how market liberalization affects corporate cross-border takeovers. Using a sample of A-share listed firms from 2007 to 2023, we find Stock Connect significantly promotes cross-border M&A activity from Chinese firms. The effect is particularly more pronounced among non-high-tech firms, firms with low institutional ownership, and non-state-owned enterprises. Mechanism tests reveal three main channels: alleviating financing constraints, mitigating the liability of origin, and enhancing the degree of firm internationalization. Specifically, Stock Connect improves firms' access to capital and reduces the cost of debt financing, increases market attention and information transparency, and promotes equity, board, and operational internationalization. These findings contribute to the literature by highlighting the positive effect of financial liberalization in cross-border investment.

Suggested Citation

  • Jiang, Mobing & Chen, Xinyu & Xiao, Mingyue & Zhang, Yuning & Wen, Wu & Chen, Xiaohua, 2025. "From connect to conquer: capital market liberalization and Chinese firms' cross-border mergers and acquisitions," Pacific-Basin Finance Journal, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:pacfin:v:93:y:2025:i:c:s0927538x25001878
    DOI: 10.1016/j.pacfin.2025.102850
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