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The Macroeconomic Determinants of Cross Border Mergers and Acquisitions and Greenfield Investments

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Author Info
Paula Cristina da Silva Ferreira Neto Rodrigues () (Universidade de Aveiro)
António Abílio Garrido Brandão () (Faculdade de Economia, Universidade do Porto)
António de Melo Cerqueira () (Faculdade de Economia, Universidade do Porto)
Abstract

When a company decides to invest abroad, it can do it through the establishment of a new firm (greenfield investment) or by the purchase of an already existing firm. Although there is a vast empirical literature on the macroeconomic determinants of aggregate FDI, there are just a few studies examining the location-specific determinants of each entry mode. The aim of this study is to extend the previous work by Globerman and Shapiro (2005) through the analysis of panel data of 53 countries over the period 1996-2006, in order to identify the potential location-specific determinants of both M&A and greenfields. We have found evidence that there is a group of mode-encompassing variables which are common to all entry modes (such as economy’s size, openness, governance and human development index) and mode-specific variables. Investor’s protection and cultural variables seem to play an important role in the explanation of M&A and greenfields, respectively.

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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 281.

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Length: 40 pages.
Date of creation: Jun 2008
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Handle: RePEc:por:fepwps:281

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Keywords: Foreign Direct Investment Cross Border Mergers and Acquisitions Greenfield Investments

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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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. Steven Globerman & Daniel Shapiro, 2004. "Governance Infrastructure and U.S. Foreign Direct Investment," International Finance 0404008, EconWPA. [Downloadable!]
    Other versions:
  2. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," CID Working Papers 49, Center for International Development at Harvard University. [Downloadable!]
  3. Baltagi, Badi H. & Chang, Young-Jae, 1994. "Incomplete panels : A comparative study of alternative estimators for the unbalanced one-way error component regression model," Journal of Econometrics, Elsevier, vol. 62(2), pages 67-89, June. [Downloadable!] (restricted)
  4. Andersson, Thomas & Svensson, Roger, 1994. " Entry Modes for Direct Investment Determined by the Composition of Firm-Specific Skills," Scandinavian Journal of Economics, Blackwell Publishing, vol. 96(4), pages 551-60.
  5. Julian di Giovanni, 2006. "What Drives Capital Flows? The Case of Cross-Border M&A Activity and Financial Deepening," Center for International and Development Economics Research, Working Paper Series 1004, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  6. Gatignon, Hubert & Anderson, Erin, 1988. "The Multinational Corporation's Degree of Control over Foreign Subsidiaries: An Empirical Test of a Transaction Cost Explanation," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 305-36, Fall.
  7. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April. [Downloadable!] (restricted)
  8. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  9. Katharina Pistor & Martin Raiser & Stanislaw Gelfer, 2000. "Law and Finance in Transition Economies," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 325-368, July. [Downloadable!] (restricted)
  10. Luis David Marques, 2000. "Modelos Dinâmicos com Dados em Painel: Revisão da Literatura," FEP Working Papers 100, Universidade do Porto, Faculdade de Economia do Porto. [Downloadable!]
  11. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  12. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April. [Downloadable!] (restricted)
  13. 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)
  14. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  15. Biswas, Romita, 2002. "Determinants of Foreign Direct Investment," Review of Development Economics, Blackwell Publishing, vol. 6(3), pages 492-504, October. [Downloadable!] (restricted)
  16. Markusen, James R. & Venables, Anthony J., 1998. "Multinational firms and the new trade theory," Journal of International Economics, Elsevier, vol. 46(2), pages 183-203, December. [Downloadable!] (restricted)
    Other versions:
  17. Steven Globerman & Daniel Shapiro, 2004. "Assessing International Mergers And Acquisitions As A Mode Of Foreign Direct Investment," International Finance 0404009, EconWPA. [Downloadable!]
  18. Rossi, Stefano & Volpin, Paolo F., 2004. "Cross-country determinants of mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 74(2), pages 277-304, November. [Downloadable!] (restricted)
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