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Risk hedging: How geopolitical risks affect enterprises' overseas merger and acquisition?

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  • Zhang, Heting
  • Tian, Lin

Abstract

Geopolitical risk profoundly impacts business decision-making in international expansion by interrupting market access, distorting resource allocation, and increasing regulatory uncertainty, consequently necessitating strategic value chain restructuring through cross-border acquisitions. This analysis analyzes Chinese A-share listed companies from 2013 to 2023, demonstrating that increasing geopolitical concerns systematically drive offshore M&A operations as a risk-hedging strategy. The empirical evidence reveals two mediating pathways: (1) increased financing constraints that compel firms to circumvent domestic credit limitations by utilizing internal resources, and (2) diminished total factor productivity that prompts efficiency-driven acquisitions in geopolitically stable markets. Further, non state-owned enterprises and higher competitive industry have more pronounced effects.

Suggested Citation

  • Zhang, Heting & Tian, Lin, 2025. "Risk hedging: How geopolitical risks affect enterprises' overseas merger and acquisition?," International Review of Economics & Finance, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025004599
    DOI: 10.1016/j.iref.2025.104296
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    References listed on IDEAS

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    2. Han, Lin & Ning, Depeng & Xin, Shiguan, 2026. "Geopolitical risk and economic growth: Evidence from ASEAN countries," Finance Research Letters, Elsevier, vol. 88(C).

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