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Acquisitions by Multinationals and Trade Liberalization

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  • Ray Chaudhuri, A.

    (Tilburg University, Center for Economic Research)

Abstract

Abstract This paper develops a theoretical framework where a multinational firm (MNE) is allowed to acquire or sell a productive asset in multiple segmented asset markets. The asset is used to produce a final good which can be sold in multiple countries, with segmented product markets, undergoing trade liberalization. I explicitly model the asset markets as well as the product markets. The paper identifies initial conditions in terms of the MNE’s pre-liberalization asset holdings across different segmented markets as a crucial factor for determining whether merger waves are triggered by trade liberalization. The more asymmetric the pre-liberalization asset holdings of the MNE across the multiple segmented markets, the more likely that trade liberalization induces an international merger wave that may harm consumers by raising product prices in multiple markets.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2014-006.

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Date of creation: 2014
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Handle: RePEc:dgr:kubcen:2014006

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Web page: http://center.uvt.nl

Related research

Keywords: acquisitions; multinational firms; endogenous mergers; cross-border mergers; trade liberalization;

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