Network Determinants of Cross-Border Merger and Acquisition Decisions

44 Pages Posted: 23 Jan 2020

See all articles by Tatiana Didier

Tatiana Didier

World Bank

Sebastian Herrador

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS)

Magali Pinat

International Monetary Fund (IMF)

Date Written: December 2019

Abstract

This paper assesses whether cross-border M&A decisions exhibit network effects. We estimate exponential random graph models (ERGM) and temporal exponential random graph models (TERGM) to evaluate the determinants of cross-country M&A investments at the sectoral level. The results show that transitivity matters: a country is more likely to invest in a new destination if one of its existing partners has already made some investments there. In line with the literature on export platforms and informational barriers, we find a sizable impact of third country effects on the creation of new investments. This effect is sizable and larger than some of the more traditional M&A determinants, such as trade openness.

Keywords: Comparative advantage, Patterns of trade, Bilateral trade, Trade finance, Economic growth, Cross-Border Merger and Acquisition, Networks, Informational Effect, WP, ERGM, logit, Handcock, acquirer, determinant

JEL Classification: G34, D85, D83, F1, E01, F16, L31, F2

Suggested Citation

Didier, Tatiana and Herrador, Sebastian and Pinat, Magali, Network Determinants of Cross-Border Merger and Acquisition Decisions (December 2019). IMF Working Paper No. 19/264, Available at SSRN: https://ssrn.com/abstract=3524299

Tatiana Didier (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
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(202)458-1525 (Phone)

Sebastian Herrador

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

Magali Pinat

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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