International Trade and the Propagation of Merger Waves

Muhammad Farooq Ahmad (), Eric de Bodt, Jarrad Harford () and David Denis

The Review of Financial Studies, 2021, vol. 34, issue 10, 4876-4925

Abstract: Cross-border merger activity is growing in importance. We map the global trade network each year from 1989 to 2016 and compare it to cross-border and domestic merger activity. Trade-weighted merger activity in trading partner countries has statistically and economically significant explanatory power for the likelihood that a given country will be in a merger wave state, at both the cross-border and domestic levels, even controlling for its own lagged merger activity. The role of trade as a channel for transmitting merger waves is confirmed using import tariff cuts and trade sanctions as instruments to mitigate endogeneity. Overall, the full trade network helps our understanding of merger waves and how merger activity propagate across borders.

JEL-codes: D83 F14 F21 G31 G34 (search for similar items in EconPapers)
Date: 2021
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