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Extending Industry Specialization through Cross-Border Acquisitions

Author

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  • Laurent Frésard
  • Ulrich Hege
  • Gordon Phillips

Abstract

We investigate the role of industry specialization in horizontal cross-border mergers and acquisitions. We find that acquirers from more specialized industries in a country are more likely to buy foreign targets in countries that are less specialized in these same industries. The role of industry specialization in foreign acquisitions is more prevalent when contracting inefficiencies and exporting costs limit arm’s-length relationships. The economic gains in cross-border deals are larger when specialized acquirers purchase assets in less specialized industries. These results are consistent with an internalization motive for foreign acquisitions, through which acquirers can apply localized intangibles on foreign assets.

Suggested Citation

  • Laurent Frésard & Ulrich Hege & Gordon Phillips, 2017. "Extending Industry Specialization through Cross-Border Acquisitions," Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1539-1582.
  • Handle: RePEc:oup:rfinst:v:30:y:2017:i:5:p:1539-1582.
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    Cited by:

    1. Alquist, Ron & Berman, Nicolas & Mukherjee, Rahul & Tesar, Linda L., 2019. "Financial constraints, institutions, and foreign ownership," Journal of International Economics, Elsevier, vol. 118(C), pages 63-83.
    2. repec:spr:jbecon:v:88:y:2018:i:3:d:10.1007_s11573-017-0886-0 is not listed on IDEAS
    3. Liang, Hao & Renneboog, Luc & Vansteenkiste, Cara, 2017. "Cross-Border Acquisitions and Employee-Engagement," Discussion Paper 2017-038, Tilburg University, Center for Economic Research.
    4. Filipovic, Zoran & Wagner, Alexander F, 2019. "The Intangibles Song in Takeover Announcements: Good Tempo, Hollow Tune," CEPR Discussion Papers 13560, C.E.P.R. Discussion Papers.
    5. repec:eee:corfin:v:45:y:2017:i:c:p:360-377 is not listed on IDEAS

    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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