The Level of Digital Development in the Host Country and M&A Performance

Economic globalization is increasing, and an aspect of this trend is the increasing frequency of cross-border mergers and acquisitions (M&As). As the world has entered the era of digital development, the efficiency of information communication has doubled. However, whether digital development can help improve the performance of cross-border M&A remains to be verified. Based on the entropy method, we constructed an index system for national digital development and analyzed the cross-border M&A events of Chinese listed companies from 2010 to 2019. Through empirical analysis, the study finds that digital development in the host country improves the performance of cross-border M&A. This effect is especially pronounced when the knowledge complexity of the M&A is inferior, or the M&A occurs in the same industry. We then analyze the mechanism of the impact of the host country’s level of digital development on improving firms’ M&A performance under Dunning’s OLI framework and the M&A transaction cost perspective, respectively. These findings enrich the theory of international investment and offer practical value to enterprises engaged in cross-border​ M&A.