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| How Anti-dumping Affects Cross-border Mergers and Acquisitions |
| YANG Lianxing
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| School of Economics, East China Normal University |
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Abstract In recent years, global economic growth has slowed, and anti-dumping trade barriers have become increasingly common measures for trade protection. Uncertainty in the external environment of global economic development has intensified. According to China's Ministry of Commerce, in 2020, Chinese exports were subject to 132 trade remedy investigations in 28 countries (regions), involving approximately 13.1 billion U.S. dollars. At the same time, Chinese companies' cross-border M&A have been undergoing a rapid development trend. According to the UNCTAD World Investment Report 2020, China's foreign direct investment flow in 2019 was 136.91 billion U.S. dollars, the second highest in the world. It has ranked in the top three in the world for 8 consecutive years. Cross-border M&A have become the main form of foreign direct investment by Chinese companies. Therefore, whether the trade barriers encountered by China have led to the rapid growth of corporate cross-border M&A, and how companies should rationally identify and respond to the opportunities and risks of cross-border M&A brought about by trade barriers are urgent questions with both theoretical and policy implications.
Trade barriers have multiple effects on enterprises' foreign direct investment. Current theories suggest that cross-border capital flows are complete substitutes for international trade, and capital flows mainly come from trade barriers. Early research on Japanese samples shows that anti-dumping regulations promote multinational investment by Japanese companies in Europe and the United States, and companies use cross-border M&A to replace product exports, thereby saving transportation costs and tariff costs (Belderbos, 1997; Barrell and Pain, 1999). However, other studies find that strong trade barriers strongly control the foreign investment of enterprises. Given the various forms of internationalization available to enterprises from countries that are the target of trade frictions, the host country often adopts the “full caution” principle, making it possible for enterprises to cross trade through investment more difficult to achieve. Only multinational companies in developed countries tend to use cross-border M&A to circumvent anti-dumping policies. From the perspective of industry, technology-intensive industries are more likely to adopt cross-border M&A in response to anti-dumping regulations than labor-intensive industries.
Based on the Thomson Financial Mergers and Acquisitions (SDC) database, this paper uses a sample of Chinese companies' cross-border M&A and the World Bank's anti-dumping database to comprehensively examine the impact of anti-dumping regulations on cross-border M&A. This paper makes three innovations. First, the literature focuses on the macro levels of country and industry, and from this view there are few studies of how anti-dumping regulations affect enterprises' cross-border M&A. By constructing multi-level anti-dumping and cross-border indicators of M&A, this paper comprehensively considers the effectiveness and internal influence mechanisms of micro-enterprises' use of cross-border M&A as a response to anti-dumping regulations, and it effectively enriches and expands related fields. Second, this paper finds that contrary to the literature, anti-dumping regulations do not directly induce corporate cross-border M&A but have a significant cross-industry and cross-“host country” inhibitory effect. Third, there are few studies of the relationships between the scale, effectiveness, and type of cross-border M&A and the relationship between anti-dumping and cross-border M&A, and this paper shows that the dimensional indicators influence each other in complicated ways. As a result, this paper provides a foundation for further research on the incentive effects of trade barriers.
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Received: 16 January 2020
Published: 02 September 2021
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