How Pandemics Affect International Investment : Evidence from M&As during SARS-CoV-1 in China

We evaluate the impact of SARS-CoV-1 infection rates on inbound cross-border mergers & acquisitions (M&As) in China. Using transaction level data on cross-border M&As from 2002 to 2005, we show that Chinese provinces that experienced high level of SARS-CoV-1 infection rates, also suffered a significant decline in cross-border M&A activity, both in terms of number of transactions and overall volume. The negative impact is entirely driven by decline in deals for non-state-owned targets. The large, negative effect was short-lived but lost deals were not recouped over time. The negative effects were larger and longer lasting for provinces with less-affected neighbors suggesting that the presence of good substitutes exacerbated the negative effects