Impact of host-country corruption on U.S. and Chinese cross-border acquisitions

Authors

  • Shavin Malhotra,

    Corresponding author
    1. Assistant Professor in Global Management Studies, Ted Rogers School of Business Management, Ryerson University, Toronto, Canada
    • Assistant Professor, Global Management Studies, Ted Rogers School of Management, Ryerson University, 575 Bay Street, Toronto, Ontario, Canada M5G 2C5, 416-979-5000, ext. 2445 (phone), 416-979-5266 (fax)
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  • PengCheng Zhu,

    1. Assistant Professor in Finance, Eberhardt School of Business, University of the Pacific
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  • William Locander

    1. Dean of the College of Business, Loyola University New Orleans
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Abstract

Does corruption in a target country create a similar effect on cross-border acquisitions (CBAs) by firms from a developed and a developing country? This article empirically examines the relationship between corruption and CBAs by firms from China and the United States. Based on a combined sample of 10,236 completed acquisitions over the period of 1990–2006, the authors find that both Chinese and U.S. firms make a significantly greater number of acquisitions in less corrupt countries. However, unlike the U.S. CBAs, we find a significantly positive relationship between the transaction value of Chinese CBAs and the level of perceived corruption in the target country. It is suggested that having been schooled in weaker institutions themselves, Chinese firms may find it easier to deal with corrupt conditions in target countries, giving them an advantage over firms from less corrupt countries. © 2010 Wiley Periodicals, Inc.

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