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Research Institute of Industrial Economics (IFN) Working Paper Series

No 927:
International Mergers with Financially Constrained Owners

Aron Berg (), Pehr-Johan Norbäck () and Lars Persson ()

Abstract: 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.

Keywords: Investment Liberalization; Mergers & Acquisitions; Corporate Governance; Ownership; (follow links to similar papers)

JEL-Codes: F23; K21; L13; O12; (follow links to similar papers)

32 pages, September 24, 2012

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