Cross-Border Mergers and Acquisitions and the Role of Trade Costs

Posted: 28 Oct 2008

See all articles by Holger Görg

Holger Görg

University of Kiel; Kiel Institute for the World Economy

Alexander Hijzen

Organization for Economic Co-Operation and Development (OECD)

Miriam Manchin

University College London; Centro Studi Luca d'Agliano

Date Written: July 26, 2008

Abstract

Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyzes the role of trade costs in explaining the increase in the number of cross-border M&As. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyze this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.

Keywords: Mergers and acquisitions, International trade, Trade costs, Gravity, FDI

JEL Classification: F02, F15, F21, F23

Suggested Citation

Gorg, Holger and Hijzen, Alexander and Manchin, Miriam, Cross-Border Mergers and Acquisitions and the Role of Trade Costs (July 26, 2008). European Economic Review, Vol. 52, No. 5, 2008. Available at SSRN: https://ssrn.com/abstract=1290365

Holger Gorg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Alexander Hijzen

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Miriam Manchin (Contact Author)

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Centro Studi Luca d'Agliano ( email )

Via Conservatorio 7
Milan, 20122
Italy

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