Abstract: Purpose/Significance This paper intends to provide empirical evidence for the government departments to improve the quality of foreign investment and optimize the factor income distribution mechanism. Design/Methodology This paper uses the PSM-DID method to accurately investigate the impact of foreign capital M&A on the labor income share of target firms on the basis of effectively control the endogeneity problem. Findings/Conclusions The results show that foreign capital M&A has significantly increased the labor income share of the target firms, however, the dynamic effect test reflects a long time lag in its effect. The heterogeneity analysis suggests that the enhancement of foreign capital M&A on the labor income share of the target firms is mainly reflected in the absolute-control-type M&A, firms in the eastern and western regions and labor-intensive industries. Furthermore, the analysis of influence mechanism suggests that foreign capital M&A has a significant positive effect on the labor income share of the target firms by expanding the employment scale and increasing the demand for highly-skilled labor.