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Trade and mergers in the presence of firm heterogeneity

Author

Listed:
  • Noriaki Matsushima

    () (Kobe University)

  • Yasuhiro Sato

    () (Osaka University)

  • Kazuhiro Yamamoto

    () (Osaka University)

Abstract

We investigate the role of firm heterogeneity in considering profitability and desirability of mergers in the international economy. Analysis shows that higher trade costs make only crossborder mergers profitable whereas larger firm heterogeneity is likely to increase both domestic and cross-border mergers. Furthermore, it is shown that whether or not a merger leads to merger waves depends on the types of firms involved in it. It is also demonstrated that larger firm heterogeneity can reduce the discrepancy between profitability and desirability of mergers when the trade cost is sufficiently low.

Suggested Citation

  • Noriaki Matsushima & Yasuhiro Sato & Kazuhiro Yamamoto, 2008. "Trade and mergers in the presence of firm heterogeneity," Discussion Papers in Economics and Business 08-35, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:0835
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0835.pdf
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    Cited by:

    1. Matsushima Noriaki & Sato Yasuhiro & Yamamoto Kazuhiro, 2013. "Horizontal Mergers, Firm Heterogeneity, and R&D Investments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(2), pages 959-990, August.

    More about this item

    Keywords

    M&As; trade; firm heterogeneity; Cournot competition;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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