Cross‐border mergers and acquisitions: does the exchange rate matter? Some evidence for Canada

Abstract.  Theoretical and empirical studies investigating the relationship between the exchange rate and FDI have generated mixed results. Using bilateral Canadian-U.S. industry level count data on cross-border mergers and acquisitions (M&As) and conditioning on industry tariff rates, value added share of industries, industry M&A trend activity, and the number of establishments, we find evidence that a real dollar depreciation of the home currency leads to an increase in the probability of foreign M&As but only in high R&D industries. These empirical results are consistent with Blonigen's asset acquisition hypothesis. Results on European M&As of Canadian firms also lean towards this result.     

Acquiring nanotechnology capabilities: role of mergers and acquisitions

Mergers and acquisitions (M&As) are an important but unstudied aspect of nanotechnology's evolution. This paper uses case review and bibliometric analysis to examine 20 M&As involving acquired firms in the nanotechnology domain. The guiding proposition is that acquired firms provide complementarities to the acquiring firms. Key measures given consideration include the nature of the post-acquisition organisation, whether the pre-acquisition geographic location is retained, the purpose of the acquisitions as indicated in news releases, and the extent of similarity in research publications and patents. Differences by the country of the acquiring firm and sub-industry are noted. Within the limitations of the case study approach, the results suggest that acquired firms in the nanotechnology domain provide complementary capabilities to their acquirers.     

Economic policy uncertainty and mergers and acquisitions: Evidence from China

This study examines the relationship between economic policy uncertainty and mergers and acquisitions (M&As) in China. Using all listed Chinese companies on the Shanghai and Shenzhen Stock Exchanges as well as 4188 ​M&A deals from the period of 2001–2018, we show that Chinese firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behavior of US firms. We further show that state-owned enterprises (SOEs) are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. SOEs are less likely to use only cash for their acquisitions during periods of high economic policy uncertainty. These results indicate the prudence of SOEs regarding acquisitions relative to non-SOEs during periods of high economic policy uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholder wealth for acquirers, and this wealth effect is more pronounced for SOEs.     

Cross-border mergers and acquisitions and the role of trade costs

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 M&As. 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.     

Multinationals,cross‐border acquisitions and wage dispersion

Abstract We examine the impact of cross‐border acquisitions on intra‐firm wage dispersion using a detailed Swedish linked employer‐employee data set including data on all firms and about 50% of the Swedish labour force with information on job‐tasks and education. Foreign acquisitions of domestic multinationals and local firms increase wage dispersion but so do also other types of cross‐border acquisitions. Hence, it is the acquisition itself rather than foreign ownership that increases wage dispersion. The positive wage effect is concentrated to CEOs and other managers, whereas other groups are either negatively affected or not affected at all.     

Cross‐border Mergers and Greenfield Foreign Direct Investment

This paper presents a model of international trade and foreign direct investment (FDI), where FDI is comprised of greenfield FDI and mergers and acquisitions (M&A). In a monopolistically competitive environment merging firms do not reduce competition. Mergers are motivated by efficiency gains and transfer of technology. Following empirical evidence, greenfield investors are modeled as more productive than M&A firms, which are in turn more productive than exporters. The model has two symmetric countries and generates two‐way flows of both M&A and greenfield FDI. Trade liberalization makes more firms choose greenfield FDI over M&A and leads to lower productivity and welfare.     

Integrated delivery systems: mergers and acquisitions

Mergers and acquisitions are usually the way an IDS is built. The CNO and/or CNOs/DONs have an integral role in the resolution of the M/A process. During this time of significant change, during which there may even be chaos, the CNOs work to maintain stability so there is as little impact as possible on patient outcomes, a core responsibility of the CNOs. The CNOs should focus on identifying and working with the highly skilled individuals in the organization to get to the recovery stage of the M/A process, at which time a high-performing organization is achieved. To build this new organization or IDS, the old organizations of the M/A must be changed (Moss Kanter, 1994). The successful CNOs will manage the trade-offs and will become experts in collaboration. The CNO's goals are to maximize the quality of patient care, the professional satisfaction of the nurse, and the goals of achieving cost effectiveness for the system (Clifford, 1998), and keeping this focus through the M/A process will yield success.     

Determinants of cross‐border bank acquisitions in transition economies1

We analyse the microeconomic determinants of cross‐border bank acquisitions in 11 transition economies over the period 1992–2006. We find that foreign banks target relatively large and efficient banks when they enter transition economies with weak institutions. This evidence provides support for the ‘market power’ hypothesis. However, when foreign banks enter more developed transition economies that have made progress in economic reform, they acquire less efficient banks. This result is in line with the efficiency hypothesis. We use a multilevel mixed effects logit model that allows us to explicitly incorporate the macroeconomic and institutional heterogeneity of the transition economies into our analysis.     

The Economics of Taxation in Casino Tourism with Cross‐border Market Power

This paper provides a theoretical proof that casino taxation may have great potential as a contributor to tourism efficiency under sufficient market power. We also examine empirical evidence for the economic efficiency of casino tourism in Macao even with a “high” tax owing to geographic market power. Both theory and evidence point to such power as a key factor that affects the ability of a tourism resort to pass along local taxes to gambling visitors. This ability makes all the difference between the good or bad effect of casino taxes on tourism development. The policy implication is that a gaming tax should be lowered to support casino businesses if it is inefficient, but can be raised to extract public revenues if it is efficient.     

FDI Policy,Greenfield Investment and Cross‐border Mergers

This paper examines a multinational's choice between greenfield investment and cross‐border merger when it enters another country via foreign direct investment (FDI) and faces the host country's FDI policy. Greenfield investment incurs a fixed plant setup cost, whereas the foreign firm obtains only a share of the joint profit from a cross‐border merger under the restriction of the FDI policy. This trade‐off is affected by market demand, cost differential, and market competition, among other things. The host country's government chooses its FDI policy to affect (or alter) the multinational's entry mode to achieve the maximum social welfare for the domestic country. We characterize the conditions shaping the optimal FDI policy and offer intuitions on FDI patterns in developing and developed countries.     

Defying gravity: The determinants of China's outbound mergers and acquisitions

We find that the determinants of China's outbound M&As depart dramatically from the literature. First, China's M&A volume with a target country is not affected by geographic distance, currency appreciation, or stock market return. Second, Chinese acquirers pick an unconventional uphill battle by primarily targeting countries with greater cultural distance, stronger investor protection laws, and higher per capita income. We also document that China's outbound M&As have a higher than normal percentage of deals being partial acquisitions. We argue that emerging markets can differ remarkably from developed countries in the considerations and modes of outbound M&As.     

The effect of heterogeneous beliefs on mergers and acquisitions

This article investigates the effect of heterogeneous beliefs on firms’ mergers and acquisitions (M&A) decisions. Using data of China’s financial market, which is featured with great heterogeneity of belief, we find that heterogeneous beliefs are positively associated with the occurrence of M&A transactions, and firms with greater heterogeneous beliefs are more likely to pay the transactions with stock. Moreover, we show that government intervention, measured by state ownership, weakens the effect of heterogeneous beliefs on firms’ M&A decisions.     

过度自信理论在中国公司并购中的应用——文献综述与评述

心理学家们发现公司管理者存在过度自信的心理特征,并且这种心理特征在公司并购决策中常具有一定的影响力。首先,过度自信这一心理特征普遍存在于公司管理者之中。其次,通过对国内外相关文献的总结,分析了过度自信理论在中国公司并购中应用的现状与特点,并且认为在中国运用过度自信理论解释公司并购活动是必要的。最后,提出了今后的研究思路、研究方法和研究难点,希望为今后研究中国公司并购活动提供理论指导。     

Cross‐border Lobbying in Preferential Trading Agreements: Implications for External Tariffs and Welfare

This paper examines the effect of cross‐border lobbying on domestic lobbying and on external tariffs in both Customs Union (CU) and Free Trade Area (FTA). We do so by developing a two‐stage game which endogenizes the tariff formation function in a political economic model of the directly unproductive rent‐seeking activities type. We find that cross‐border lobbying un‐ambiguously increases both domestic lobbying and the equilibrium common external tariffs in a CU. The same result also holds for FTA provided tariffs for the member governments are strategic complements. We also develop a specific oligopolistic model of FTA and show that tariffs are indeed strategic complements in such a model.     

Globalization and profitability of cross-border mergers and acquisitions

This paper studies how the surplus generated by the globalization process is divided between MNEs and owners of domestic assets. We construct an oligopoly model where the equilibrium acquisition pattern, the acquisition price and firms’ greenfield investments are endogenously determined. Acquisition entry is shown to be more likely when the complementarity between domestic and foreign assets is high. However, we show that such acquisitions might have a low profitability, since the bidding competition over the domestic assets is then so fierce that the firms involved would be better off not starting a bidding war. Risks associated with different entry modes are also examined.     

Analysing the employment effects of mergers and acquisitions

This paper examines the employment effects of mergers and acquisitions (M&As) by using matched establishment-level data from Finland. Our data register practically almost all M&As in all sectors. We compare the employment effects of cross-border M&As with the effects arising from two different types of domestic M&As and internal restructurings. The results show that cross-border M&As lead to downsizing in manufacturing employment. The effects of cross-border M&As on employment in non-manufacturing are much weaker. Changes in ownership associated with domestic M&As and internal restructurings also typically cause employment losses, but they exhibit an interesting sectoral variation.     

The effects of mergers and acquisitions on the firm size distribution

This paper provides new empirical evidence on the effects of mergers and acquisitions (M&As) on the shape of the firm size distribution, by using data of the population of manufacturing firms in the Netherlands. Our analysis shows that M&As do not affect the size distribution when we consider the entire population of firms. When we focus on the firms involved in an M&A event, we observe a shift of the firm size distribution towards larger sizes. Firm size distribution becomes more concentrated around the mean, less skewed to the right hand side, and thinner at the tails as a whole. The shift toward higher sizes due to M&A is not uniform but affects firms of different sizes in different ways. While the number of firms in the lower tail decreased, the number of firms in the central size classes increased substantially and outweighed the increase in the number (and mean size) of firms in the upper tail of the distribution (consequently the overall market concentration measured by the Herfindahl index declines). M&As lead to a departure from log-normality of the firm size distribution, suggesting that external growth does not follow Gibrat’s law. Our counterfactual analysis highlights that only internal growth does not affect the shape of the size distribution of firms. On the contrary, it suggests that the change in the size distribution is almost entirely due to the external growth of the firms.

The impact of mergers and acquisitions on company employment in the United Kingdom

This paper provides a systematic empirical analysis of the effects of take-over and merger activity on firm employment in the United Kingdom using a specially constructed database for the period 1967-1996. Our results indicate that significant rationalisations in the use of labour occur as firms reduce joint output and increase efficiency post-merger. These effects are particularly pronounced in the case of related and especially hostile mergers.     

Good and useless FDI: The growth effects of greenfield investment and mergers and acquisitions

We explore the effect of foreign direct investment (FDI) on economic growth, distinguishing between mergers and acquisitions (M&As) and “greenfield” investment. A simple model underlines that, unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country's capital stock. Greenfield FDI should therefore have a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results that are based on a panel of up to 127 industrialized, emerging, and developing countries over 1990 to 2010.     

The impact of horizontal mergers and acquisitions on cost and quality in health care

Mergers and acquisitions among HMOs, hospitals and other health care providers can be disconcerting to benefits staff and employees, but they can be successfully managed. They may offer an employer the opportunity to improve the quality of care provided and to do so at reduced costs.