On the profitability of cross-border mergers
Working paper
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http://hdl.handle.net/11250/162950Utgivelsesdato
2001-10Metadata
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- Discussion papers (SAM) [662]
Sammendrag
A horizontal merger is unlikely to be profitable unless it involves
the large majority of firms in an industry. This well established result
was developed by Salant et al (1983) in a closed economy setting. The
present paper studies the profitability of mergers in an open economy.
A cross-border merger provides the acquiring firm with market access.
If alternative modes of market entry are sufficiently costly, a merger
may indeed be profitable. The relationship between entry costs and
the profitability of merger is, however, not a monotonic one. An increase
in entry costs may cause a change in the optimal entry mode
of rival firms such that a merger may be unprofitable even for higher
entry costs. The paper also derives results regarding the nationality of the acquiring firm.
Utgiver
Norwegian School of Economics and Business Administration. Department of EconomicsSerie
Discussion paper2001:14