Cross-Border Acquisitions and Host Country Competitiveness

Abstract

We investigate the competitive effects of cross-border takeovers and find that following the acquisitions, the competitiveness of cross-border targets improves. The results for industry rivals, however, are mixed. Rivals of targets of cross-border acquisitions experience improvements in their competitive position in the long-term, while at the same time, their growth and market share suffer. These acquisitions lead to a shifting of market share from rivals to targets of cross-border, which is suggestive of increased industry concentration. Cross-border acquisitions also enhance the host country’s financial market development, and lead to increases in innovation in the host country. Overall, our results cast some doubts on the often pessimistic view of foreign takeovers held by some politicians that these deals are bad for the host country.

Keywords: mergers and acquisitions, cross-border, takeovers, competitiveness

JEL Classification: G14, G34