Working Paper Series
Investment Liberalization - Who Benefits from Cross-Border Mergers & Acquisitions?
() and Lars Persson
Abstract: 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.
Keywords: Investment Liberalization; FDI; Mergers & Acquisitions; Restructuring; (follow links to similar papers)
JEL-Codes: F02; F23; K21; L13; L33; O12; (follow links to similar papers)
39 pages, December 19, 2001
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