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In-Market vs. Cross-Border Merging: The Impact of Merger Policy

Author

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  • Jean-Marc Zogheib

Abstract

?In this paper, we study how merger policy affects the choice between domestic and cross-border merger. We build a model where a firm chooses between these two types of mergers. While a domestic merger will be refused if it is anticompetitive, a cross-border merger has an uncertain ex-post profitability. We first study this tradeoff in a scenario where, after a non-profitable cross-border merger, exiting the foreign market through another merger is not possible. In this case, a more lenient merger policy discourages cross-border mergers relative to domestic mergers. However, if it is possible to exit through a domestic merger, this tradeoff is altered, as a more lenient merger policy lowers barriers to exit, thereby increasing the profitability of a cross-border merger. ? ?JEL classification: ? ?L22, L40, D21, G34? ?.?

Suggested Citation

  • Jean-Marc Zogheib, 2018. "In-Market vs. Cross-Border Merging: The Impact of Merger Policy," Revue d'économie industrielle, De Boeck Université, vol. 0(4), pages 107-129.
  • Handle: RePEc:cai:reidbu:rei_164_0107
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    More about this item

    Keywords

    merger policy; in-market vs. cross-border mergers; exit;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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