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International Mergers with Financially Constrained Owners

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Author Info

  • Berg, Aron

    ()
    (Research Institute of Industrial Economics (IFN))

  • Norbäck, Pehr-Johan

    ()
    (Research Institute of Industrial Economics (IFN))

  • Persson, Lars

    ()
    (Research Institute of Industrial Economics (IFN))

Abstract

This paper proposes a cross-border M&A model with financially constrained owners in which the identity of the buyer and seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase the domestic owner’s investment in growth industries by reducing their financial restrictions. This calls for a ”financial” efficiency defense in the merger law. We also show that cross-border M&As are not only driven by effects on the merged entity, but also driven by the seller’s alternative investment opportunities.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 927.

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Length: 32 pages
Date of creation: 24 Sep 2012
Date of revision:
Handle: RePEc:hhs:iuiwop:0927

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Keywords: Investment Liberalization; Mergers & Acquisitions; Corporate Governance; Ownership;

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References

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Cited by:
  1. Norback, Pehr-Johan & Tekin-Koru, Ayca & Waldkirch, Andreas, 2013. "Multinational Firms and Plant Divestiture," MPRA Paper 45957, University Library of Munich, Germany.

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