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Cross-border mergers and acquisitions and the role of trade costs

Listed author(s):
  • Alexander Hijzen
  • Holger Görg
  • Miriam Manchin

Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in both the number and the value of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether distance and trade policy barriers affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.

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File URL: http://ec.europa.eu/economy_finance/publications/pages/publication821_en.pdf
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Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers 2008 - 2015 with number 242.

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Length: 33 pages
Date of creation: Feb 2006
Handle: RePEc:euf:ecopap:0242
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  1. Julian di Giovanni & Contact: iber@haas.berkeley.edu, 2003. "What Drives Capital Flows? The Case of Cross-Border M&A Activity and Financial Deepening," International Trade 0303002, EconWPA.
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