The Impact of Cross-National Distance on Chinese Firms’ Ownership Choice in Cross-Border Mergers and Acquisitions

Purpose – This study aims to examine how language distance and institutional distance affect ownership proportion decisions in cross-border mergers and acquisitions (M&As), with a focus on Chinese firms. It also explores how industry relatedness and uncertainty avoidance moderate these relationships. Design/Methodology/Approach – The study is grounded in transaction cost theory and employs a quantitative empirical approach. It analyzes 432 cross-border M&A cases completed by Chinese firms between 2002 and 2023. Data were collected from the SDC Platinum database, and regression models were used to test both direct and interaction effects. Findings –The results indicate that language distance significantly influences ownership proportion, while institutional distance does not show a statistically significant effect. Industry relatedness mitigates the negative impact of language distance, whereas uncertainty avoidance amplifies the preference for higher ownership under high language distance. Moreover, uncertainty avoidance strengthens the relationship between institutional distance and ownership choice, while the moderating effect of industry relatedness on institutional distance is not significant. Research Implications – This study contributes to international business literature by integrating cultural and institutional perspectives into the analysis of ownership decisions. It highlights the nuanced roles of contextual factors such as industry relatedness and uncertainty avoidance, offering practical insights for firms—especially Chinese MNEs—on how to navigate cross-border integration challenges more effectively.