Cross-border mergers & acquisitions with financially constrained owners

Aron Berg, Pehr-Johan Norbäck and Lars Persson

Review of World Economics (Weltwirtschaftliches Archiv), 2017, vol. 153, issue 3, No 1, 433-456

Abstract: Abstract Mergers give acquirers control over the assets of the merged entity and give sellers control over financial assets. We propose a cross-border merger model with home biased financially constrained owners in which the subsequent investments of the buyer and the seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase domestic owners’ investment in growth industries by reducing their financial restrictions. This calls for a “financial efficiency” defence in merger law. We also show that cross-border M&As are partly driven by the seller’s alternative investment opportunities.

Keywords: Investment liberalization; Mergers & acquisitions; Corporate governance; Ownership (search for similar items in EconPapers)
JEL-codes: F23 K21 L13 O12 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10290-017-0281-5

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