2006–2010

Investment Liberalization – Why a Restrictive Cross-Border Merger Policy can be Counterproductive

Reprint No. 2007:11

Author(s): Pehr-Johan Norbäck and Lars PerssonYear: 2007 Title: Journal of International Economics Volume (No.): 72 (2) Pages: 366–380


Investment liberalizing countries are often concerned that cross-border mergers and acquisitions, in contrast to greenfield investments, might have an adverse effect on domestic firms and consumers. However, given that domestic assets are sufficiently scarce, we identify a preemption effect and an asset complementarity effect, which imply that the acquisition price is substantially higher than the domestic seller's profits. Moreover, we show that for the acquisition to take place, the MNE must be sufficiently efficient when using the domestic assets, otherwise rivals will expand their business, thereby making the acquisition unprofitable. Consequently, restricting cross-border M&As may also hurt consumers.


Reference:
Norbäck, Pehr-Johan, and Lars Persson (2007), "Investment Liberalization – Why a Restrictive Cross-Border Merger Policy can be Counterproductive". Journal of International Economics 72(2), 366–380.

Pehr-Johan Norbäck

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Ph: +46 8 665 4522
Mob: +46 73 574 3379
pehr-johan.norback@if...

Lars Persson

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Ph: +46 8 665 4504
lars.persson@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

9783030350048_200x_the-european-union-and-the-return-of-the-nation-state.jpg

This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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