Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2007-01-25
Number: 08-013/2
Author-Name: Steven Brakman
Author-Email: s.brakman@rug.nl
Author-Workplace-Name: University of Groningen
Author-Name: Harry Garretsen
Author-Workplace-Name: Utrecht University
Author-Name: Charles van Marrewijk
Author-Workplace-Name: Erasmus University Rotterdam
Title: Cross-border Mergers and Acquisitions: On Revealed Comparative Advantage And Merger Waves
Abstract: By combining two large data sets (on international trade flows and cross-border mergers and acquisitions – M&As), we test two implications of Neary’s (2003, 2007) general oligopolistic equilibrium (GOLE) model (incorporating strategic interaction between firms in a general equilibrium setting). In terms of economic importance, the dominant merger wave variable is a positive global-all effect, indicating that M&A waves are an economy-wide, global phenomenon. Country-specific merger wave variables are of secundary importance. In accordance with the bilateral GOLE model as specified by Neary, we find strong evidence that acquiring firms operate in strong sectors. However, we also find (less pronounced) evidence that target firms are active in strong, not weak sectors, which we label the ‘target paradox’. We show how a multi-country extension of the GOLE model that allows for firm heterogeneity can explain this target paradox.
Classification-JEL: F10; F12; L13
Keywords: Comparative Advantage; Cross-border Mergers and Acquisitions; Merger Waves; General Oligopolistic Equilibrium Trade Model
File-Url: https://papers.tinbergen.nl/08013.pdf
File-Format: application/pdf
File-Size: 466684 bytes
Handle: RePEc:tin:wpaper:20080013