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Discussion Paper Details

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Title: Cross-Border Acquisitions and Greenfield Entry: Profitability and Stock Market Value

Author(s): Pehr-Johan Norb�ck and Lars Persson

Publication Date: August 2003

Keyword(s): FDI, mergers and acquisitions and stock market value

Programme Area(s): Industrial Organization

Abstract: This Paper studies cross-border acquisitions and greenfield entry in a multi-firm setting. Acquisition entry is more likely when the acquirer gains a strong position in the product market, relative to greenfield entrants. We also show that such acquisitions might have a low profitability, however. The reason is that the bidding competition over the domestic assets is then so fierce that the firms involved would be better off not starting a bidding war. Moreover, this implies that domestic firms will then sell their assets at a substantially higher price than their reservation price. Implications for stock market values are also derived.

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Bibliographic Reference

Norb�ck, P and Persson, L. 2003. 'Cross-Border Acquisitions and Greenfield Entry: Profitability and Stock Market Value'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=3998