Investment Lilberalization - Why a Restrictive Cross-Border Merger Policy can be Counterproductive

Arbeitspapier

Investment liberalizing countries are often concerned that cross-border mergers & acquisitions, in contrast to greenfield investments, might have an adverse effect on domestic firms and consumers. However, given that domestic assets are sufficiently scarce, we identify a preemption effect and an asset complementarity effect, which imply that the acquisition price is significantly higher than the domestic seller's profits. Moreover, we show that for the acquisition to take place, the MNE must be sufficiently efficient when using the domestic assets, otherwise rivals will expand their business, thereby making the acquisition unprofitable. Consequently, restricting cross-border M&As may also hurt consumers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFN Working Paper ; No. 666

Classification and Topics

• Classification: Wirtschaft ; Multinational Firms; International Business ; Antitrust Law ; Oligopoly and Other Imperfect Markets ; Microeconomic Analyses of Economic Development
• Subject: Investment Liberalization ; Mergers & Acquisitions ; Development ; Ownership ; Internationales Investitionsrecht ; Deregulierung ; Übernahme ; Wirkungsanalyse ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Norbäck, Pehr-Johan ; Persson, Lars
• Event: Veröffentlichung
• (who): Research Institute of Industrial Economics (IFN)
• (where): Stockholm
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/81221
• Last update: 10.03.2025, 11:43 AM CET