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Cross-Border Mergers & Acquisitions: The Facts as a Guide for International Economics

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Listed:
  • Steven Brakman
  • Harry Garretsen
  • Charles van Marrewijk
  • Charles van Marrewijk

Abstract

Using a detailed and large data set on cross-border merger and acquisitions we discuss the relationship between theory and observed empirical characteristics: (i) most FDI is in the form of M&As, (ii) firms engaged in M&As seem to be ‘market-seeking’, (iii) M&As come in waves (the most recent wave is still unfolding), (iv) economic integration (international deregulation) stimulated M&As, (v) the size of and inequality between M&As grows over time. Our contention in this chapter is that these stylized facts drive and should drive recent theoretical contributions in the field of international economics that try to understand cross-border mergers and acquisitions. Although some models (notably Neary, 2003) explain a number of the characteristics, a full-fledged model of cross-border M&As that, at least in principle, can deal with all the characteristics is still lacking.

Suggested Citation

  • Steven Brakman & Harry Garretsen & Charles van Marrewijk & Charles van Marrewijk, 2006. "Cross-Border Mergers & Acquisitions: The Facts as a Guide for International Economics," CESifo Working Paper Series 1823, CESifo.
    • Handle: RePEc:ces:ceswps:_1823
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    References listed on IDEAS

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    1. Neary, J. Peter, 2009. "Trade costs and foreign direct investment," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 207-218, March.
    2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    3. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394, Elsevier.
    4. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
    5. Steven Brakman & Harry Garretsen & Charles van Marrewijk & Charles van Marrewijk, 2005. "Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves," CESifo Working Paper Series 1602, CESifo.
    6. J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(4), pages 1229-1257.
    7. van Marrewijk, Charles, 2006. "International Economics: Theory, application, and policy," OUP Catalogue, Oxford University Press, number 9780199280988.
    8. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School of Economics, University College Dublin.
    9. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    10. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    11. Sven-Olof Fridolfsson & Johan Stennek, 2005. "Why Mergers Reduce Profits And Raise Share Prices-A Theory Of Preemptive Mergers," Journal of the European Economic Association, MIT Press, vol. 3(5), pages 1083-1104, September.
    12. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2006. "Comparative advantage, cross-border mergers and merger waves: International economics meets industrial organization," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 7(01), pages 22-26, April.
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    Cited by:

    1. Ray Chaudhuri, A., 2014. "Acquisitions by Multinationals and Trade Liberalization," Other publications TiSEM 9dbb83b3-8647-4b5f-952b-3, Tilburg University, School of Economics and Management.
    2. M. Del Gatto & C.S. Mastinu, 2016. "Sequentiality and Distance(s) in Cross-Border Mergers and Acquisitions: Evidence from Micro Data," Working Paper CRENoS 201616, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. Olivier Bertrand & Laurence Capron, 2015. "Productivity enhancement at home via cross-border acquisitions: The roles of learning and contemporaneous domestic investments," Strategic Management Journal, Wiley Blackwell, vol. 36(5), pages 640-658, May.
    4. Liberini, Federica, 2014. "Corporate Taxes and the Growth of the Firm," The Warwick Economics Research Paper Series (TWERPS) 1042, University of Warwick, Department of Economics.
    5. Stiebale, Joel, 2010. "The Impact of Foreign Acquisitions on the Investors' R&D Activities – Firm-level Evidence," Ruhr Economic Papers 161, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Bhagat, Sanjai & Malhotra, Shavin & Zhu, PengCheng, 2011. "Emerging country cross-border acquisitions: Characteristics, acquirer returns and cross-sectional determinants," Emerging Markets Review, Elsevier, vol. 12(3), pages 250-271, September.
    7. Stiebale, Joel, 2013. "The impact of cross-border mergers and acquisitions on the acquirers' R & D Firm-level evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 31(4), pages 307-321.
    8. Joel Stiebale & Michaela Trax, 2011. "The effects of cross‐border M&As on the acquirers’ domestic performance: firm‐level evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(3), pages 957-990, August.
    9. Muhammad Jahangir Ali & Seema Miglani & Man Dang & Premkanth Puwanenthiren & Mazur Mieszko, 2022. "Do family firms pay less for external funding?," Australian Journal of Management, Australian School of Business, vol. 47(2), pages 225-250, May.
    10. Arulampalam, Wiji & Devereux, Michael P. & Liberini, Federica, 2019. "Taxes and the location of targets," Journal of Public Economics, Elsevier, vol. 176(C), pages 161-178.
    11. Joel Stiebale & Michaela Trax, 2010. "The Eff ects of Cross-border M&As on the Acquirers’ Domestic Performance – Firm-level Evidence," Ruhr Economic Papers 0159, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    12. Martin Gassebner & Pierre-Guillaume Méon, 2010. "Where do Creditor Rights Matter? Creditor Rights, Political Constraints, and Cross-Border M&A Activity," Working Papers CEB 10-019.RS, ULB -- Universite Libre de Bruxelles.
    13. Amrita Ray Chaudhuri, 2014. "Cross-Border Mergers and Market Segmentation," Journal of Industrial Economics, Wiley Blackwell, vol. 62(2), pages 229-257, June.
    14. repec:zbw:rwirep:0161 is not listed on IDEAS
    15. Ray Chaudhuri, A., 2011. "Cross-Border Mergers and Market Segmentation (Replaces CentER DP 2010-096)," Discussion Paper 2011-112, Tilburg University, Center for Economic Research.
    16. Steven Brakman & Gus Garita & Harry Garretsen & Charles van Marrewijk & Charles van Marrewijk, 2008. "Unlocking the Value of Cross-Border Mergers and Acquisitions," CESifo Working Paper Series 2294, CESifo.
    17. Döhrn, Roland & Engel, Dirk & Stiebale, Joel, 2008. "Außenhandel und ausländische Direktinvestitionen deutscher Unternehmen," Studien zum deutschen Innovationssystem 3-2008, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin.
    18. repec:zbw:rwirep:0159 is not listed on IDEAS
    19. Fabienne Boudier & Julie Lochard, 2013. "How do Cross-Border Mergers and Acquisitions Answer to Deregulation in Services?," The World Economy, Wiley Blackwell, vol. 36(11), pages 1424-1441, November.
    20. Joel Stiebale, 2010. "The Impact of Foreign Acquisitions on the Investors‘ R&D Activities – Firm-level Evidence," Ruhr Economic Papers 0161, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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