Cross-Border Mergers & Acquisitions and the Role of Trade Costs
University of Nottingham Research Paper Series No. 2005/17
28 Pages Posted: 4 Aug 2005
Date Written: 2005
Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in both the number and the value of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether distance and trade policy barriers affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.
Keywords: Mergers and acquisitions, international trade, trade costs, gravity, FDI
JEL Classification: F02, F15, F21, F23
Suggested Citation: Suggested Citation