Cross-Border Mergers &amp; Acquisitions and the Role of Trade Costs

Hijzen, Alexander; Görg, Holger; Manchin, Miriam

doi:10.2139/ssrn.765106

Cited by 25 publications

(18 citation statements)

References 34 publications

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“…Again, UNCTAD (2007) shows that in 2006 the total value of worldwide cross-border M&As was roughly 0.9 trillion USD, amounting to about 70% of total FDI flows. 1 These trends have brought international mergers into the academic debate, with recent literature attempting to model these activities theoretically and providing empirical evidence on their determinants (e.g., Neary 2007;Hijzen et al 2008;Head and Ries 2008). Moreover, the growing importance of M&As has given rise to policy concerns as to the impact of such cross-border mergers for domestic economies.…”

Section: Introductionmentioning

confidence: 99%

Foreign acquisition, plant survival, and employment growth

Bandick

Görg

2010

Canadian J of Economics

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This paper analyses the effect of foreign acquisition on survival probability and employment growth of target plant using data on Swedish manufacturing plants during the period 1993-2002. An improvement over previous studies is that we take into account firm level heterogeneity by separating the targeted plants into those within Swedish MNEs, Swedish exporting non-MNEs, and purely domestic firms before foreign takeover. The results, controlling for possible endogeneity of the acquisition dummy using an IV and propensity score matching approach suggest that acquisition by foreign owners increases the lifetime of the acquired plants only if the plant was an exporter. The effect differs depending on whether the acquisition is horizontal or vertical. We also find robust positive employment growth effects only for exporters, and only if the takeover is vertical, not horizontal. AbstractThis paper analyses the effect of foreign acquisition on survival probability and employment growth of target plant using data on Swedish manufacturing plants during the period 1993-2002. An improvement over previous studies is that we take into account firm level heterogeneity by separating the targeted plants into those within Swedish MNEs, Swedish exporting non-MNEs, and purely domestic firms before foreign takeover. The results, controlling for possible endogeneity of the acquisition dummy using an IV and propensity score matching approach suggest that acquisition by foreign owners increases the lifetime of the acquired plants only if the plant was an exporter. The effect differs depending on whether the acquisition is horizontal or vertical. We also find robust positive employment growth effects only for exporters, and only if the takeover is vertical, not horizontal.JEL Classification: F23, L23

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Section: Introductionmentioning

confidence: 99%

Foreign acquisition, plant survival, and employment growth

Bandick

Görg

2010

Canadian J of Economics

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“…The combined interpretation of these two facts is that certain developing nations that are less exposed to free trade may overextend their liabilities past a certain social optimum by increasing the acquisitions of foreign MNCs. Developing nations' foreign acquisitions are much discussed in the literature on knowledge sourcing (Campos and Kinoshita 2002;Cortright 2001;Hijzen et al 2008;Lensink and Morrissey 2006). The results here caution against possible overextension.…”

Section: Findings and Analysismentioning

confidence: 66%

“…It is not always possible to trace the country from which these funds originate. Moreover, FDI refers to net investments whereas M&As refer to gross transactions in the form of acquisitions and divestments (Hijzen et al 2008). Head and Ries (2008) note that from 1987 to 2001 about two-thirds of foreign direct investment was in the form of M&As rather than new plants.…”

Section: Methodsmentioning

confidence: 99%

Lowering the Marginal Corporate Tax Rate: Why the Debate?

Anguelov

2017

Economic Affairs

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This paper as the co-winner of the 2015 second annual Amartya Sen Prize Competition given by the Global Justice Program at Yale University in partnership with Global Financial Integrity and Academics Stand Against Poverty http://globaljustice.macmillan.yale.edu/news/winners-second-amartya-sen-prizeannounced. Abstract:In an effort to attract new investors and retain existing producers, governments use corporate tax rates as a policy tool for industrial recruitment, resulting in interstate tax competition. FDI and GDP growth are the two policy outcomes gauged in interstate tax competition. The assumption is that lower corporate taxes lead to increase in FDI, which results in capital formation that creates GDP growth. This 60-nation panel study tests that assumption through examining economic indicators continent on taxation, such as FDI and MNC mergers and acquisitions between 1999 and 2009. The results suggest that reduced corporate tax rates can increase FDI but decrease annual GDP growth. The main policy implication is that tax competition may attract investment, but may not promote overall economic growth, offering support for value-extraction theories.

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“…Indeed, there is no consensus regarding the impact of financial depth in the target country. Some papers (Rossi and Volpin, 2007;Hijzen et al, 2008) find a positive impact on M&A flows in both the acquirer and the target countries but take as dependent variable the number of deals or the target ratio (i.e. the fraction of cross-border deals as target over the total number of cross-border dealsboth as target and as acquirer).…”

Section: Resultsmentioning

confidence: 99%

“…Bilateral trade costs are another important determinant of cross-border M&As. Theoretically, trade costs have an ambiguous impact on M&As (Hijzen et al, 2008). On the one hand, higher trade costs could encourage 'tariff-jumping' mergers.…”

Section: B Empirical Model and Econometrical Issuesmentioning

confidence: 99%

How do Cross‐Border Mergers and Acquisitions Answer to Deregulation in Services?

Boudier

Lochard

2013

World Economy

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Whereas competition in the manufacturing sector was progressively ensured beginning with the end of the Second World War, services have been progressively opened to international competition only since the late 1980s and are still among the most regulated sectors in OECD countries. In this paper, we analyse the impact of deregulation in that sector on cross‐border mergers and acquisitions (M&As) in services. We find that deregulation favours inward M&As in services. This positive effect occurs through two channels: a reduction in entry costs and an increase in investment opportunities. On the other hand, deregulation has an ambiguous impact on outward M&As that depends on the initial level of regulation in the acquiring country. In particular,we provide some evidence of a U‐shaped relationship between deregulation and outward M&As in the service sector. In countries that are initially highly deregulated,deregulation fosters outward M&As. Conversely, in situations in which government control is large, privatisation and deregulation are likely to reduce the incentive for firms to engage in cross‐border M&A deals.

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Cross-Border Mergers & Acquisitions and the Role of Trade Costs

Cited by 25 publications

References 34 publications

Foreign acquisition, plant survival, and employment growth

Foreign acquisition, plant survival, and employment growth

Lowering the Marginal Corporate Tax Rate: Why the Debate?

How do Cross‐Border Mergers and Acquisitions Answer to Deregulation in Services?

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