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Cross-border mergers & acquisitions with financially constrained owners

Author

Listed:
  • Aron Berg

    (Lund University
    Research Institute of Industrial Economics)

  • Pehr-Johan Norbäck

    (Research Institute of Industrial Economics)

  • Lars Persson

    (Research Institute of Industrial Economics)

Abstract

Mergers give acquirers control over the assets of the merged entity and give sellers control over financial assets. We propose a cross-border merger model with home biased financially constrained owners in which the subsequent investments of the buyer and the seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase domestic owners’ investment in growth industries by reducing their financial restrictions. This calls for a “financial efficiency” defence in merger law. We also show that cross-border M&As are partly driven by the seller’s alternative investment opportunities.

Suggested Citation

  • Aron Berg & Pehr-Johan Norbäck & Lars Persson, 2017. "Cross-border mergers & acquisitions with financially constrained owners," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(3), pages 433-456, August.
    • Handle: RePEc:spr:weltar:v:153:y:2017:i:3:d:10.1007_s10290-017-0281-5
    DOI: 10.1007/s10290-017-0281-5
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    More about this item

    Keywords

    Investment liberalization; Mergers & acquisitions; Corporate governance; Ownership;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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