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Predatory FDI during economic crises: insights from outbound FDI from China and host country responses

Predatory FDI during economic crises: insights from outbound FDI from China and host country... This paper aims to analyze outbound investments from China at the time of economic crisis caused due to the coronavirus (COVID-19) pandemic and how target valuation and the host country’s inbound investment policies influence the acquisition intents. As firms witness low valuations during an economic downturn, they become attractive targets for opportunistic buyers, who may be driven by motives beyond business and influenced by the home country’s political agenda. Such attempts are countered with the adoption of restrictive investment policies in host countries.Design/methodology/approachThe study uses secondary data on cross-border acquisitions from China over the past year and compares the characteristics of these acquisitions with cross-border acquisitions of acquirers from other large developed and developing economies.FindingsStatistical analyzes show that there are significant differences in the way acquirers from China pursue strategic asset seeking, creeping and control seeking acquisitions during the pandemic and the pre-pandemic period. This paper also observes that reduced valuation of the target, due to economic downturn or otherwise, result in greater propensity in strategic asset seeking acquisitions by Chinese acquirers. At the same time, adverse policies at host nations negatively influence the strategic asset seeking propensity of these acquirers. In addition, the premium in the valuation of target assets during the pandemic does not drop significantly when compared with that of the pre-pandemic period.Originality/valueWith the outbreak of COVID-19 and its concomitant economic impact across the globe, the study brings forwards insights on predatory foreign direct investment (FDI) and explores how policy responses in host countries can be comprehensive rather than disembedded and unilateral. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Critical Perspectives on International Business Emerald Publishing

Predatory FDI during economic crises: insights from outbound FDI from China and host country responses

Das, Arindam
Critical Perspectives on International Business , Volume 17 (2): 21 – May 17, 2021
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References (78)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1742-2043
DOI
10.1108/cpoib-05-2020-0050
Publisher site
See Article on Publisher Site

Abstract

This paper aims to analyze outbound investments from China at the time of economic crisis caused due to the coronavirus (COVID-19) pandemic and how target valuation and the host country’s inbound investment policies influence the acquisition intents. As firms witness low valuations during an economic downturn, they become attractive targets for opportunistic buyers, who may be driven by motives beyond business and influenced by the home country’s political agenda. Such attempts are countered with the adoption of restrictive investment policies in host countries.Design/methodology/approachThe study uses secondary data on cross-border acquisitions from China over the past year and compares the characteristics of these acquisitions with cross-border acquisitions of acquirers from other large developed and developing economies.FindingsStatistical analyzes show that there are significant differences in the way acquirers from China pursue strategic asset seeking, creeping and control seeking acquisitions during the pandemic and the pre-pandemic period. This paper also observes that reduced valuation of the target, due to economic downturn or otherwise, result in greater propensity in strategic asset seeking acquisitions by Chinese acquirers. At the same time, adverse policies at host nations negatively influence the strategic asset seeking propensity of these acquirers. In addition, the premium in the valuation of target assets during the pandemic does not drop significantly when compared with that of the pre-pandemic period.Originality/valueWith the outbreak of COVID-19 and its concomitant economic impact across the globe, the study brings forwards insights on predatory foreign direct investment (FDI) and explores how policy responses in host countries can be comprehensive rather than disembedded and unilateral.

Journal

Critical Perspectives on International Business – Emerald Publishing

Published: May 17, 2021

Keywords: FDI; Cross-border takeovers; Inbound investment policy; Cross-border M&A

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