Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81250
Authors: 
Norbäck, Pehr-Johan
Persson, Lars
Year of Publication: 
2005
Series/Report no.: 
IUI Working Paper 644
Abstract: 
Investment liberalizing countries are often concerned that cross-border mergers & acquisitions, in contrast to greenfield investments, might have an adverse effect on domestic firms and consumers. However, 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 profits. Moreover, we show that for the acquisition to take place, the MNE must be sufficiently efficient when using the domestic assets, otherwise rivals will expand their business, thereby making the acquisition unprofitable. Consequently, restricting cross-border M&As may also hurt consumers.
Subjects: 
Investment Liberalization
Mergers & Acquisitions
Development
Ownership
JEL: 
F23
K21
L13
O12
Document Type: 
Working Paper

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