International Mergers with Financially Constrained Owners

33 Pages Posted: 25 Nov 2012

See all articles by Aron Berg

Aron Berg

Lund University; IFN

Pehr-Johan Norback

Research Institute of Industrial Economics (IFN)

Lars Persson

Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Date Written: September 24, 2012

Abstract

This paper proposes a cross-border M&A model with financially constrained owners in which the identity of the buyer and seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase the domestic owner’s investment in growth industries by reducing their financial restrictions. This calls for a ”financial” efficiency defense in the merger law. We also show that cross-border M&As are not only driven by effects on the merged entity, but also driven by the seller’s alternative investment opportunities.

Keywords: Investment Liberalization, Mergers & Acquisitions, Corporate Governance

JEL Classification: F23, K21, L13, O12

Suggested Citation

Berg, Aron Oskar and Norback, Pehr-Johan and Persson, Lars, International Mergers with Financially Constrained Owners (September 24, 2012). IFN Working Paper No. 927, Available at SSRN: https://ssrn.com/abstract=2179820

Aron Oskar Berg

Lund University ( email )

P.O Box 7080
Lund
Sweden

IFN ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Pehr-Johan Norback

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Lars Persson (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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