DP6397 Cross-Border Mergers & Acquisitions and the Role of Trade Costs

Author(s):	Holger Görg, Alexander Hijzen, Miriam Manchin
Publication Date:	July 2007
Keyword(s):	FDI, gravity, mergers and acquisitions, trade costs
JEL(s):	F02, F15, F21, F23
Programme Areas:	International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=6397

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.