How Does Government Ownership Affect a Chinese Firm’s Long-Term Performance After a CBA?

Abstract

Recent research on cross-border acquisitions (CBAs) has relied heavily on the firm-level resource-based perspective without adequately addressing the role of the institutional context. The rising CBAs by Chinese firms have posed a significant challenge to extant literature due to their relatively unique characteristics and their distinct home country institutional environment, in particular the active role of the government. In this study, we seek to integrate the institution-based view with the resource-based perspective and examine how Chinese firms’ post-CBA long-term performance is affected by government ownership in conjunction with key firm-specific and institutional boundary conditions. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long-term performance. However, the above relationship is moderated by such firm-level boundary conditions as political connection and financial slack, and the country-level institutional boundary conditions (i.e. the host country formal institutions and the home-host country cultural distance).