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Factors Affecting International Mergers and Acquisitions

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  • Reed, Michael R.
  • Babool, Md. Ashfaqul Islam
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    Abstract

    The purpose of this paper is to investigate the factors that explain outward and inward merger and acquisition (M/A) activity for a country. The variables used to explain M/A activity include the exchange rate, interest rate, and stock market prices. Regression analysis is used to isolate and clarify the effects of these three factors for aggregate M/A activity and M/A activity within the food, beverage, and tobacco industry. The analysis shows that three variables, the exchange rate, interest rate, and stock prices, are quite important in explaining variations in M/A activity by country. Exchange rate changes in particular have a very elastic impact on outward M/A activity, indicating that price effects are important in determining outward investment flows. The stock market index positively influenced inward and outward M/A activity. The interest rate had a negative impact on M/A in the inward and outward M/A models with M/A outflows decreasing by about the same percentage that interest rates increase.

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    File URL: http://purl.umn.edu/34373
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    Bibliographic Info

    Article provided by International Food and Agribusiness Management Association (IAMA) in its journal International Food and Agribusiness Management Review.

    Volume (Year): 06 (2003)
    Issue (Month): 04 ()
    Pages:

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    Handle: RePEc:ags:ifaamr:34373

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    Keywords: Industrial Organization;

    References

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    1. Daniel Pick & Utpal Vasavada, 1998. "Exchange Rate Effects on the Relationship between FDI and Trade in the U.S. Food Processing Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(5), pages 1073-1079.
    2. Munisamy Gopinath & Daniel Pick & Utpal Vasavada, 1999. "The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 442-452.
    3. Barrell, Ray & Pain, Nigel, 1996. "An Econometric Analysis of U.S. Foreign Direct Investment," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 200-207, May.
    4. Vasconcellos, Geraldo M. & Kish, Richard J., 1996. "Factors affecting cross-border mergers and acquisitions: The Canada-U.S. experience," Global Finance Journal, Elsevier, vol. 7(2), pages 223-238.
    5. Vasconcellos, G. M. & Kish, R. J., 1998. "Cross-border mergers and acquisitions: the European-US experience," Journal of Multinational Financial Management, Elsevier, vol. 8(4), pages 431-450, November.
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