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Corruption distance and equity strategies in cross-border M&As: The moderating roles of political connections

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  • Xiaoyuan Li

Abstract

This study explores the impact of corruption distance between home and the host countries on equity strategies in cross-border mergers and acquisitions (M&As). In addition, this study evaluates the moderating roles of two distinctive types of political connections. Analyzing cross-border M&A transactions by Chinese acquirers from 2016 to 2021, this study finds that greater corruption distance significantly increases the equity percentage of acquisitions by Chinese acquirers. This is because a greater corruption distance prompts Chinese acquirers to prefer a higher equity percentage, aimed at mitigating transaction costs and securing control over the target firm. Notably, this study argues that inherent political connections weaken the positive effect of corruption distance on the equity percentage of acquisitions; whereas acquired political connections strengthen its positive effect. In conclusion, this study extends the existing literature of the cross-border equity strategies of enterprises from emerging markets and offers practical insights for Chinese enterprises in managing complex cross-border M&A activities.

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  • Xiaoyuan Li, 2025. "Corruption distance and equity strategies in cross-border M&As: The moderating roles of political connections," PLOS ONE, Public Library of Science, vol. 20(6), pages 1-17, June.
    • Handle: RePEc:plo:pone00:0325968
    DOI: 10.1371/journal.pone.0325968
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    1. Katariina Nilsson Hakkala & Pehr-Johan Norbäck & Helena Svaleryd, 2008. "Asymmetric Effects of Corruption on FDI: Evidence from Swedish Multinational Firms," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 627-642, November.
    2. Klaus Uhlenbruck & Peter Rodriguez & Jonathan Doh & Lorraine Eden, 2006. "The Impact of Corruption on Entry Strategy: Evidence from Telecommunication Projects in Emerging Economies," Organization Science, INFORMS, vol. 17(3), pages 402-414, June.
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