Investment Liberalization - Who Benefits from Cross Border Mergers

Lars Persson and Norbäck, Pehr-Johan
Authors registered in the RePEc Author Service: Pehr-Johan Norbäck

No 3166, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Investment liberalizing countries are often concerned that cross-border mergers & acquisitions might have an adverse effect on domestic firms and benefit multinational enterprises (MNEs). Given that domestic assets are sufficiently scarce, we identify a preemption effect and an asset complementarity effect which imply that the acquisition price is substantially higher than the domestic seller?s reservation price. The preemption effect also implies that the seller might capture some of the MNEs? initial rents. Moreover, other policies used in times of investment liberalization, such as restructuring, are explained through their effect on the value of the domestic assets.

Keywords: Fdi; Mergers and acquisitions; Restructuring (search for similar items in EconPapers)
JEL-codes: F00 F20 K20 L10 L30 O10 (search for similar items in EconPapers)
Date: 2002-01
New Economics Papers: this item is included in nep-ifn and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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