Cross-Border Acquisitions and Greenfield Entry: Profitability and Stock Market Value

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

No 3998, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper studies cross-border acquisitions and greenfield entry in a multi-firm setting. Acquisition entry is more likely when the acquirer gains a strong position in the product market, relative to greenfield entrants. We also show that such acquisitions might have a low profitability, however. The reason is that the bidding competition over the domestic assets is then so fierce that the firms involved would be better off not starting a bidding war. Moreover, this implies that domestic firms will then sell their assets at a substantially higher price than their reservation price. Implications for stock market values are also derived.

Keywords: Fdi; Mergers and acquisitions; Stock market value (search for similar items in EconPapers)
JEL-codes: F23 G34 L13 (search for similar items in EconPapers)
Date: 2003-08
New Economics Papers: this item is included in nep-cfn and nep-ifn
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