Cross-border Merger and Acquisitions, Government Regulations and Market Competition

Abstract

Cross-border (M&As) have long been a popular strategy for transnational companies (TNCs) and will inevitably influence competitive behaviors and patterns of the host countries' markets. This paper demonstrates the mechanism and results of these effects by constructing a Nash-Cournot model, with government as a participator in cross-border (M&As). In the model, the factors of government regulation are discussed in the market competition framework on the basis of cross-border (M&As). The basic conclusions this paper drew are: the total output will reduce because of government regulations; enterprises-foreign enterprise (TNCs) and domestically-funded enterprise (host country's enterprise) will decrease their outputs, but the decrease of the former one will not exceed the latter; foreign investing enterprise can maintain, even increase its output when it involves in the Cournot competition with the domestic investing enterprise for the factor of corporate governance optimization; and different modes of government regulations will lead to different market structures.