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Foreign investment screening and cross-border M&A in sensitive sectors: Evidence from Germany

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  • Kaya, Orçun
  • Mostowfi, Mehdi
  • Sugandhita, Sugandhita

Abstract

Foreign investment screening has become a central instrument for safeguarding strategic technologies in recent years. This paper examines how such measures shape cross-border M&A patterns, using Germany’s 2020 policy reform as a case study. Applying a difference-in-differences framework to firm-level M&A data from 2016 to 2024, we find that the reform significantly increased the likelihood of investment in German firms by other EU investors in newly regulated sectors, with majority-control acquisitions emerging as a mechanism in this pattern. Our findings indicate that investment screening fosters a shift toward European ownership in sensitive sectors, as partner economies increase their investment, thereby reshaping the dynamics of cross-border capital flows.

Suggested Citation

  • Kaya, Orçun & Mostowfi, Mehdi & Sugandhita, Sugandhita, 2026. "Foreign investment screening and cross-border M&A in sensitive sectors: Evidence from Germany," Finance Research Letters, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:finlet:v:92:y:2026:i:c:s1544612326000565
    DOI: 10.1016/j.frl.2026.109525
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    References listed on IDEAS

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