Economic Nationalism in Mergers & Acquisitions

62 Pages Posted: 16 Mar 2011

See all articles by Isil Erel

Isil Erel

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Serdar Dinc

Rutgers University

Date Written: March 15, 2011


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 for natives against foreigners takes place both as resistance to foreign acquirers and as support for domestic ones. It is also stronger at times and places with strong nationalistic sentiments, as proxied by the vote share of extreme right parties, which have made such preferences against foreigners their main policy in Europe. This nationalism has both direct and indirect economic impact: Government interventions are very effective in preventing foreign bidders from completing the merger and in helping domestic bidders succeed. Indirectly, nationalistic government reactions deter foreign companies from bidding for other companies in that country in the future.

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

JEL Classification: G34

Suggested Citation

Erel, Isil and Dinc, Serdar, Economic Nationalism in Mergers & Acquisitions (March 15, 2011). AFA 2012 Chicago Meetings Paper, Available at SSRN: or

Isil Erel (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Serdar Dinc

Rutgers University ( email )

111 Washington Avenue
Newark, NJ 07102
United States


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