Discussion Paper Details

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Title: Cross-Border Mergers & Acquisitions and the Role of Trade Costs

Author(s): Holger Görg, Alexander Hijzen and Miriam Manchin

Publication Date: July 2007

Keyword(s): FDI, gravity, mergers and acquisitions and trade costs

Programme Area(s): International Trade and Regional Economics

Abstract: Cross-border mergers and acquisitions (M&As) have increased dramatically over the last two decades. This paper analyses the role of trade costs in explaining the increase in the number of cross-border mergers and acquisitions. In particular, we distinguish horizontal and non-horizontal M&As and investigate whether trade costs affect these two types of mergers differently. We analyse this question using industry data for 23 OECD countries for the period 1990-2001. Our findings suggest that while in the aggregate trade costs affect cross-border merger activity negatively its impact differs importantly across horizontal and non-horizontal mergers. The impact of trade costs is less negative for horizontal mergers, which is consistent with the tariff-jumping argument.

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Bibliographic Reference

Görg, H, Hijzen, A and Manchin, M. 2007. 'Cross-Border Mergers & Acquisitions and the Role of Trade Costs'. London, Centre for Economic Policy Research.