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Cross-border mergers and acquisitions and the role of trade costs

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  • Alexander Hijzen
  • Holger G�rg
  • Miriam Manchin

Abstract

Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in both the number and the value of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether distance and trade policy barriers affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.

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Bibliographic Info

Paper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 242.

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Length: 33 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:euf:ecopap:0242

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Keywords: mergers and acquisitions; international trade; trade costs; gravity; FDI; Hijzen; G�rg; Manchin;

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