Cross-Border Mergers and Acquisitions: Financial and Institutional Forces

54 Pages Posted: 4 Mar 2009

See all articles by Nicolas Coeurdacier

Nicolas Coeurdacier

London Business School

Roberto A. De Santis

European Central Bank (ECB) - Directorate General Economics

Antonin Aviat

Paris School of Economics (PSE)

Date Written: March 4, 2009

Abstract

Cross-border mergers and acquisitions (M&As) sharply increased over the last two decades. It is often pointed out that cross-border capital reallocation is partly the result of financial liberalization policies, government policies and regional agreements. In this paper, we identify some of the main forces driving cross-border M&As using a unique database on bilateral cross-border M&As at the sectoral level (in manufacturing and services) over the period 1985-2004. We focus on the role of institutional and financial developments with a special attention to the role played by the European Integration process. We identify the impact of (i) joining the European Union and (ii) joining the Euro on cross-border M&As. We show that EU and EMU have almost doubled M&As in manufacturing towards their members from all over the globe, with an additional 50% increase within EMU countries. Conversely, the service sector did not exploit the opportunity offered by the single currency. We also show how cross-border M&As are linked to the acquirer expected profitability and provide insights on the effectiveness of policies to attract foreign capital (such as corporate tax incentives, and interventions to improve the country's financial system and product market regulations).

Keywords: Cross Mergers and Acquisitions, Gravity Equation, Euro

JEL Classification: F30, F36, F41, G11

Suggested Citation

Coeurdacier, Nicolas and De Santis, Roberto A. and Aviat, Antonin, Cross-Border Mergers and Acquisitions: Financial and Institutional Forces (March 4, 2009). ECB Working Paper No. 1018. Available at SSRN: https://ssrn.com/abstract=1336488

Nicolas Coeurdacier (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Roberto A. De Santis

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

Antonin Aviat

Paris School of Economics (PSE)

48 Boulevard Jourdan
Paris, 75014 75014
France

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