Working Paper No. 569

Investment Liberalization - Who Benefits from Cross-Border Mergers & Acquisitons?

Published: December 19, 2001Pages: 39Keywords: Investment Liberalization; FDI; Mergers & Acquisitions; RestructuringJEL-codes: F02; F23; K21; L13; L33; O12

Investment Liberalization - Who Benefits from Cross-Border Mergers & Acquisitons? Pehr-Johan Norbäck and Lars Persson


Investment liberalizing countries are often concerned that cross-border mergers & acquisitions might have an adverse effect on domestic firms and benefit multinational enterprises (MNEs). 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 reservation price. The preemption effect also implies that the seller might capture some of the MNEs' initial rents. Moreover, other policies used in times of investment liberalization, such as restructuring, are explained through their effect on the value of the domestic assets.

 

Pehr-Johan Norbäck

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Lars Persson

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lars.persson@ifn.se

Interdisciplinary European Studies

The European Union and the Return of the Nation State

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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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