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Location Choices of Multinational Firms: The Case of Mergers and Acquisitions

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Author Info
Bertrand, Olivier
Mucchielli, Jean-Louis
Zitouna, Habib

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Abstract

This article examines the location choices of cross-border Mergers and Acquisitions (M&A) between OECD members´ firms in the 1990`s. In addition to traditional determinants of FDI, we estimate the impact of specific factors affecting the M&A location pattern. Two distinct econometric methods are implemented: the conditional logit and the count model (Poisson or negative binomial model). In spite of the use of alternative econometric methods, we find that the supply of target firms (captured by market capitalization and privatization activity) constrains the location of M&A. However, is it not the only determinant of location: market size, labor costs, market access and financial openness play a positive and significant role on the M&A location. A bandwagon effect is also observed. In the opposite, the corporate tax rate and the productivity decrease the probability to attract M&A. Cultural and geographic distances and differences in legal rules also exert a negative significant impact on M&A strategies. Only the ownership structure has contrasted results.

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Paper provided by Hamburg Institute of International Economics in its series Discussion Paper Series with number 26170.

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Date of creation: 2004
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Handle: RePEc:ags:hiiedp:26170

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Keywords: Foreign Direct Investment; Merger and Acquisition; Location; conditional logit; count model; Industrial Organization; International Relations/Trade; F23; L1; R3;

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References listed on IDEAS
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  19. Bris, Arturo & Brisley, Neil & Cabolis, Christos, 2008. "Adopting better corporate governance: Evidence from cross-border mergers," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 224-240, June. [Downloadable!] (restricted)
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  25. Simon J. Evenett, 2003. "The Cross Border Mergers and Acquisitions Wave of the Late 1990s," NBER Working Papers 9655, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  29. Breandán Ó Huallacháin, Neil Reid, 1997. "Acquisition versus Greenfield Investment: The Location and Growth of Japanese Manufacturers in the United States," Regional Studies, Taylor and Francis Journals, vol. 31(4), pages 403-416, June. [Downloadable!] (restricted)
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  32. Gonzalez, Pedro & Vasconcellos, Geraldo M. & Kish, Richard J., 1998. "Cross-border mergers and acquisitions: The undervaluation hypothesis," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(1), pages 25-45. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Raff, Horst & Ryan, Michael & Stähler, Frank, 2005. "Asset Ownership and Foreign-Market Entry," Economics Working Papers 2006,01, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
    Other versions:
  2. Hideki Yamawaki, 2006. "The location of American and Japanese multinationals in Europe," International Economics and Economic Policy, Springer, vol. 3(2), pages 157-173, November. [Downloadable!] (restricted)
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