Mergers in Open Economies

Falvey, Rod

doi:10.1111/1467-9701.00181

Cited by 47 publications

(45 citation statements)

References 9 publications

(8 reference statements)

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“…There is also a small theoretical literature addressing the welfare aspects of crossborder M&As in international oligopoly markets. 10 Our paper extends this literature by allowing foreign acquisitions to affect domestic tax revenues. The paper is also related to the literature on tax competition and FDI.…”

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confidence: 79%

Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues

2006

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract We find that reduced foreign corporate taxes may lead to inefficient foreign acquisitions if complementarities between foreign and domestic assets are low, and to efficient foreign acquisitions if such complementarities are high. Moreover, with large complementarities, foreign acquisitions can increase domestic tax revenues. The reason is that in the bidding competition between the foreign firms, all benefits from the acquisition, including tax advantages and evaded taxes, are competed away and captured by the domestic seller which, in turn, pays capital gains tax on the proceeds. Technical issues in the tax code, such as the treatment of goodwill deductibility, is also shown to crucially affect the pattern of foreign acquisitions. Terms of use: Documents in EconStor may

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confidence: 79%

Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues

2006

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“…Using unique micro data on R&D investments in foreign affiliates of Swedish multinational enterprises in 34 countries over the period 1970-1998, we first find evidence that: 8 • Acquired affiliates have a higher level of R&D intensity (and are more likely to perform R&D) than greenfield affiliates. This gap persists over time and with the age of affiliates, as well as for different firm types and industries.…”

Section: Introductionmentioning

confidence: 94%

Should R&D Champions Be Protected from Foreign Takeovers?

et al. 2008

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe analyze how the entry mode of Foreign Direct Investments (FDI) affects affiliate R&D activities. Using unique affiliate level data for Swedish multinational firms, we first present empirical evidence that acquired affiliates have a higher level of R&D intensity than greenfield (start-up) affiliates. This gap persists over time and with the age of the affiliates, as well as for different firm types and industries. To explain this finding, we develop an acquisitioninvestment-oligopoly model where we show that for a foreign acquisition to take place in equilibrium, the acquiring MNE must invest sufficiently in sequential R&D in the affiliate. Otherwise, rivals will expand their business, thus making the acquisition unprofitable. Two additional predictions of the model -that foreign firms acquire high-quality domestic firms and that the gap in R&D between acquired and greenfield affiliates decreases in acquisition transaction costs -are consistent with the data.

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“…10 See for example Salant et al (1983), Head and Ries (1997), Long and Vousden (1995) and Falvey (1998). We endogenise acquisition prices in Section 4.2.…”

Section: The Modelmentioning

confidence: 99%

Subsidy competition and the mode of FDI

Albornoz

Corcos

Kendall

2009

Regional Science and Urban Economics

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We model subsidy competition for a foreign MNC's investment in two trading partners. Taking into account acquisitions as an alternative investment mode weakens the case for subsidising greenfield investment. Competition between countries results in welfare losses, which are reinforced by positive externalities from the MNC's presence and regional integration. The results also apply to situations where the acquisition price accounts for the possibility of subsidies and when governments use acquisition subsidies as an alternative to greenfield subsidies. JEL-Classification: F15, F21, F23

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Mergers in Open Economies

Cited by 47 publications

References 9 publications

Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues

Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues

Should R&D Champions Be Protected from Foreign Takeovers?

Subsidy competition and the mode of FDI

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