Abstract

http://ssrn.com/abstract=1913104
 


 



Cross‐Border Acquisitions and Optimal Government Policy


Gautam Bose


University of New South Wales - Australian School of Business - School of Economics

Arghya Ghosh


University of New South Wales - Australian School of Business - School of Economics

Sudipto Dasgupta


Hong Kong University of Science & Technology - Department of Finance

September 2011

Economic Record, Vol. 87, Issue 278, pp. 427-437, 2011

Abstract:     
This article analyses the optimality of policy specifications used to regulate the acquisition and operation of local firms by multinational enterprises. We emphasise the consequence of such regulations on the price of the domestic firm in the market for corporate control. We show that it is optimal to impose ceilings on foreign ownership of domestic firms when the government's objective is to maximise domestic shareholder profits, or a sum of those profits and tax revenues. While the optimal ceiling is high enough for the multinational enterprise (MNE) to gain control of the domestic firm, it nevertheless influences the price that the MNE must pay for the domestic firm's shares to the advantage of the domestic shareholders. Surprisingly, stringent restrictions on transfer pricing turn out to be strictly suboptimal in this context.

Number of Pages in PDF File: 11

Keywords: F23

Accepted Paper Series


Date posted: August 22, 2011  

Suggested Citation

Bose, Gautam and Ghosh, Arghya and Dasgupta, Sudipto, Cross‐Border Acquisitions and Optimal Government Policy (September 2011). Economic Record, Vol. 87, Issue 278, pp. 427-437, 2011. Available at SSRN: http://ssrn.com/abstract=1913104 or http://dx.doi.org/10.1111/j.1475-4932.2011.00727.x

Contact Information

Gautam Bose (Contact Author)
University of New South Wales - Australian School of Business - School of Economics ( email )
High Street
Sydney, NSW 2052
Australia
Arghya Ghosh
University of New South Wales - Australian School of Business - School of Economics ( email )
High Street
Sydney, NSW 2052
Australia
Sudipto Dasgupta
Hong Kong University of Science & Technology - Department of Finance ( email )
Clear Water Bay, Kowloon
Hong Kong
852-2358-7666 (Phone)
852-2358-1749 (Fax)
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