Investment Liberalization - Who Benefits from Cross Border Mergers?

43 Pages Posted: 14 Feb 2002

See all articles by Pehr-Johan Norbäck

Pehr-Johan Norbäck

Research Institute of Industrial Economics (IFN)

Lars Persson

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

Date Written: January 2002

Abstract

Investment liberalizing countries are often concerned that cross-border mergers and 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

JEL Classification: F00, F20, K20, L10, L30, O10

Suggested Citation

Norbäck, Pehr-Johan and Persson, Lars, Investment Liberalization - Who Benefits from Cross Border Mergers? (January 2002). Available at SSRN: https://ssrn.com/abstract=300703

Pehr-Johan Norbäck (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

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

Lars Persson

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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