Trade and mergers in the presence of firm heterogeneity

Noriaki Matsushima, Yasuhiro Sato and Kazuhiro Yamamoto ()
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Kazuhiro Yamamoto: Osaka University

No 08-35, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP)

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.

Keywords: M&As; trade; firm heterogeneity; Cournot competition (search for similar items in EconPapers)
JEL-codes: F12 G34 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-int and nep-mic
Date: 2008-11
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Persistent link: http://EconPapers.repec.org/RePEc:osk:wpaper:0835

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