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Merger and acquisition FDI, relative wealth and relative access to bank credit: Evidence from a bivariate zero-inflated count model

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  • Ho, Woon-Yee
  • Wang, Peiming
  • Alba, Joseph D.

Abstract

We use a bivariate zero-inflated negative binomial model to examine Japanese merger and acquisition (M&A) FDI jointly with other types of Japanese FDI (or non-M&A FDI) into the United States. We find that for firms likely to engage in FDI, their rates of FDI are affected by the financial health of their main banks. However, only the rate of M&A FDI is affected by relative wealth. The rate of non-M&A FDI is affected by profitability and firm size. Our findings show the importance of distinguishing M&A FDI from non-M&A FDI and of considering the two types of FDI jointly.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Economics & Finance.

Volume (Year): 18 (2009)
Issue (Month): 1 (January)
Pages: 26-30

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Handle: RePEc:eee:reveco:v:18:y:2009:i:1:p:26-30

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Web page: http://www.elsevier.com/locate/inca/620165

Related research

Keywords: F31 F36 G21 Merger and acquisition FDI Relative access to bank credit Relative wealth Bivariate zero-inflated negative binomial model;

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References

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  1. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
  2. Kenneth A. Froot & Jeremy C. Stein, 1992. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," NBER Working Papers 2914, National Bureau of Economic Research, Inc.
  3. Alba, Joseph D. & Wang, Peiming, 2007. "Relative Access to Credit, Relative Wealth and FDI: Firm-Level Evidence from Japanese FDI into the United States," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 231-255.
  4. Michael W. Klein & Joe Peek & Eric S. Rosengren, 2002. "Troubled Banks, Impaired Foreign Direct Investment: The Role of Relative Access to Credit," American Economic Review, American Economic Association, vol. 92(3), pages 664-682, June.
  5. Michael W. Klein & Eric Rosengren, 1992. "The Real Exchange Rate and Foreign Direct Investment in the United States: Relative Wealth vs. Relative Wage Effects," NBER Working Papers 4192, National Bureau of Economic Research, Inc.
  6. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
  7. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
  8. Wang, Peiming, 2003. "A bivariate zero-inflated negative binomial regression model for count data with excess zeros," Economics Letters, Elsevier, vol. 78(3), pages 373-378, March.
  9. Mara Faccio & Ronald W. Masulis, 2005. "The Choice of Payment Method in European Mergers and Acquisitions," Journal of Finance, American Finance Association, vol. 60(3), pages 1345-1388, 06.
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Cited by:
  1. Kevin E. Staub & Rainer Winkelmann, 2009. "Consistent estimation of zero-inflated count models," SOI - Working Papers 0908, Socioeconomic Institute - University of Zurich, revised Aug 2011.

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