Working Paper: CEPR ID: DP6397
Authors: Holger Grg; Alexander Hijzen; Miriam Manchin
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.
Keywords: FDI; gravity; mergers and acquisitions; trade costs
JEL Codes: F02; F15; F21; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade costs (F19) | cross-border M&A activity (F23) |
| trade costs (F19) | horizontal mergers (L22) |
| trade costs (F19) | nonhorizontal mergers (L41) |