Working Paper No. 927

International Mergers with Financially Constrained Owners

Published: September 24, 2012Pages: 32Keywords: Investment Liberalization; Mergers & Acquisitions; Corporate Governance; OwnershipJEL-codes: F23; K21; L13; O12
Published version

International Mergers with Financially Constrained Owners Aron Berg, Pehr-Johan Norbäck and Lars Persson


This paper proposes a cross-border M&A model with financially constrained owners in which the identity of the buyer and seller can be determined. We show that policies blocking foreign acquisitions to protect the domestic industry can be counterproductive. Foreign acquisition can increase the domestic owner’s investment in growth industries by reducing their financial restrictions. This calls for a ”financial” efficiency defense in the merger law. We also show that cross-border M&As are not only driven by effects on the merged entity, but also driven by the seller’s alternative investment opportunities.

Pehr-Johan Norbäck

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Lars Persson

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

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