The effects of political embeddedness on cross-border mergers and acquisitions in China: Alibaba’s case

ABSTRACT

With its dominant state-owned enterprises (SOEs), peculiar governance system and international ambitions, China offers a unique setting to test theories explaining the role of political embeddedness in management decisions. Cross-border M&As have become an essential tool for Chinese acquirers to internationalize. We examine whether political embeddedness influences firms’ propensity for conducting cross-border M&As and their success. Using panel data with 30,314 firm-year observations from 2000 to 2015, we show that non-SOEs conduct more cross-border M&As than SOEs and they benefit more from M&A activities. After summarizing the dilemmas faced by politically embedded enterprises (PEEs), we introduce the successful case of Alibaba acquiring Lazada to explain the quantitative results in detail. Finally, we suggest potential approaches to alleviate institutional barriers for successful cross-border M&As.

KEYWORDS:

• Alibaba
• China
• cross-border M&A
• government ownership
• political connexion
• political embeddedness

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. Unfortunately, due to copyright issues, the calculated values of cumulative abnormal returns (CARs) of each firm-year observation cannot be shared. However, all transformed data and computations used for the analyses are available on request by the authors.

2. Information Source: https://www.alibabagroup.com.

3. Information Source: https://www.lazada.com.

Additional information

Funding

This paper is supported by the Fundamental Research Funds for the Central Universities at Southwestern University of Finance and Economics [JBK2201036].

Notes on contributors

Zhi Wang

Zhi Wang is an Associate Professor at the Southwestern University of Finance and Economics. His research interests include international finance and green finance. He has published in Kyklos, Accounting and Finance, Journal of Cleaner Production, and Accounting Research.

Gerhard Kling

Gerhard Kling holds a Chair in Finance at the University of Aberdeen. His research focuses on corporate finance and applied mathematics. He has published in Organizational Research Methods, Organization Studies, and the Journal of Statistical Physics.

Jiayi Li

Jiayi Li is a postgraduate student in School of Accounting at the Southwestern University of Finance and Economics. Her research interests focus on green finance and corporate governance.