Economic Nationalism in Mergers and Acquisitions

Abstract

This paper studies the government reaction to large corporate merger attempts in the European Union during 1997-2006 using hand-collected data. It documents widespread economic nationalism in which the government prefers the target companies remain domestically owned rather than foreign-owned. This preference is stronger at times and places with strong far-right parties, weaker governments, and against countries for which the people in the target country have little affinity. This nationalism has both direct and indirect economic impact on mergers and impedes capital flows. In particular, nationalist government reactions deter foreign companies from bidding for other companies in that country in future.

Keywords: Protectionism, Patriotism, National Champions, Too-Big-To-Be-Acquired,Government Intervention, International Capital Flows

JEL Classification: G34, G30, F52