Mixed Blessing: The Impact of State Equity on Cross-Border Acquisition of Non-State-Controlled Firms

Abstract

Current literature suggests that state-owned entities from emerging economies suffer from legitimacy pressure in their cross-border acquisitions (CBAs). Based on resource-based view and institutional theory, our study argues that state-owned entities can bring resource benefits in CBAs when they become shareholders of non-state- controlled firms. We also found more state ownership would expose non-state-controlled firms to legitimacy pressure after legitimacy threshold in host countries rised. We tested our theory using a sample of CBA deals announced by China’s non-state-controlled listed firms from 2009 to 2018. The result showed that, for non-state- controlled firms, more state-owned equities facilitated CBA completion. However, this relationship became weaker when the target firm was publicly listed, in a high-technology industry, and located in a more developed institutional setting. The findings imply that state ownership is a mixed blessing for the CBAs of non-state- controlled firms.