The Belt and Road Initiative and Chinese Cross-border Mergers & Acquisitions

Abstract

The Belt and Road Initiative was introduced to further economic connections with partner countries and foster development within China. We examine the effect of the Initiative on Chinese cross-border M&As. We find that the Initiative significantly increases the probability and the transaction amount of M&A deals in target countries. Moreover, the market reacts more positively to these deals. We find that the effect is entirely driven by state-owned enterprises during our sample period and it is more pronounced in firms that are located on the more-developed eastern coast of China. The evidence suggests that the announcement of the Belt and Road Initiative was followed by economically meaningful cross-border M&A in targeted countries.