Why do half of the cross-border M&As conducted by Chinese MNCs fail? Government affiliation and cross-border M&A completion

Government affiliation is a very important factor to consider when studying multinational corporations (MNCs) in emerging markets. However, the role of government affiliation in the completion of cross-border M&As conducted by emerging market MNCs is little understood. This gap is significant because half of publicly announced cross-border M&As are never completed. To fill this gap, we study how government affiliation affects the likelihood of M&A completion. Considering cross-border M&A data on Chinese multinationals, we find a negative relationship between government affiliation and acquisition completion. Further integrating data on Chinese MNCs' foreign subsidiaries shows that SOEs with previous business operations in the host country, or operations in the same industry in other foreign countries, are more likely to complete cross-border M&As. However, when a large number of SOEs enter a foreign country simultaneously, the host country will feel threatened instead of feeling that the SOEs are credible or legitimate. Therefore, the likelihood of M&A completion will be reduced.