Same as it Ever Was? Europe's National Borders and the Market for Corporate Control

National borders continue to be strong barriers for mergers and acquisitions in Europe. Using regional data, we construct a gravity model and find that the restraining impact of national borders decreased by more than 20 percent between 1991 and 2007. However, no significant change has occurred since the mid-1990s (i.e., four years before the introduction of the euro). In comparison, we run a corresponding analysis in the United States using the 10 federal regions as country equivalents. The resulting ‘quasi-border’ effect in the United States is weaker than that in the European Union. Yet its decline by 56 percent is much stronger in the same period. We conclude that European integration policy has had little effect on fostering cross-border transactions.

Keywords: European integration, corporate control, border effects

JEL Classification: F21, G34

Suggested Citation: Suggested Citation

Umber, Marc P. and Grote, Michael H. and Frey, Rainer, Same as it Ever Was? Europe's National Borders and the Market for Corporate Control (November 12, 2012). Journal of International Money and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1478862 or http://dx.doi.org/10.2139/ssrn.1478862