2006–2010

Globalization and Profitability of Cross-border Mergers & Acquisitions

Reprint No. 2008:10

Author(s): Pehr-Johan Norbäck and Lars PerssonYear: 2008 Title: Economic Theory Volume (No.): 35 (2) Pages: 241–266


This paper studies how the surplus generated by the globalization process is divided between MNEs and owners of domestic assets.We construct an oligopoly model where the equilibrium acquisition pattern, the acquisition price and firms’ greenfield investments are endogenously determined. Acquisition entry is shown to bemore likelywhen the complementarity between domestic and foreign assets is high. However, we show that such acquisitions might have a low profitability, since the bidding competition over the domestic assets is then so fierce that the firms involved would be better off not starting a bidding war. Risks associated with different entry modes are also examined.


Reference:
Norbäck, Pehr-Johan and Lars Persson (2008), "Globalization and Profitability of Cross-border Mergers & Acquisitions". Economic Theory 35(2), 241–266.

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

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