Unlocking the Value of Cross-Border Mergers and Acquisitions

34 Pages Posted: 7 May 2008

See all articles by Steven Brakman

Steven Brakman

University of Groningen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gus Garita

The Bank of Korea

Harry Garretsen

Utrecht University - School of Economics; CESifo (Center for Economic Studies and Ifo Institute); Radboud University Nijmegen - Department of Economics

Charles van Marrewijk

Utrecht University - School of Economics

Date Written: May 1, 2008

Abstract

Most FDI takes place between the developed countries, which suggests that the market-seeking motive is important for understanding FDI. However, given the stylized fact that trade barriers (e.g. transportation costs and financial barriers) have declined over the past 20 years, models that aim to explain market-seeking FDI tend to predict a decline in FDI. Neary (2008) offers two explanations for this puzzle: (1) the export platform motive (where firms gain access to an integrated market by investing in one of the "integrated" countries); (2) Neary's (2007) GOLE model, which explains cross-border mergers and acquisitions (this model is of interest since most FDI comes in the form of M&As). By using a gravity framework, where we also deal with the "zero gravity problem", we confirm the predictions of the GOLE model.

Keywords: cross-border M&As, financial openness, economic integration

JEL Classification: F10, F12, F15, F36, F37, F41, G34, L13

Suggested Citation

Brakman, Steven and Garita, Gus and Garretsen, Harry and van Marrewijk, Charles, Unlocking the Value of Cross-Border Mergers and Acquisitions (May 1, 2008). CESifo Working Paper Series No. 2294. Available at SSRN: https://ssrn.com/abstract=1130152

Steven Brakman (Contact Author)

University of Groningen - Department of Economics ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
+31 50 363 3746 (Phone)
+31 50 363 3730 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Gus Garita

The Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Harry Garretsen

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands
+31 0 30 253 9810 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands
+31 24 361 5889 (Phone)
+31 24 361 1846 (Fax)

Charles Van Marrewijk

Utrecht University - School of Economics ( email )

Kriekenpitplein 21-22
Adam Smith Building
Utrecht, 3584 EC
Netherlands
*31-(0)30-2539810 (Phone)

HOME PAGE: http://www.charlesvanmarrewijk.nl

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