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Barbarians at the Gates: State Control of Global Mergers and Acquisitions

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  • John Conybeare
  • Dong‐Hun Kim
Abstract
Cross‐border mergers and acquisitions are a major and often politicised component of foreign direct investment. Using data on individual transactions between 1970 and 2006, we examine the restrictions countries place on mergers and acquisitions, whether they use these controls to discriminate against foreigners seeking to acquire domestic firms, and what factors may predict the propensity to block foreign entry by this method of direct investment. Drawing partly on the existing literature, we test hypotheses that state intervention can be explained by characteristics of the countries whose firms are targeted by acquirers, including per capita income, democracy, trade exposure, market size, government share of national income and industrial structure. Although democracy, trade exposure and high government expenditure are associated with more stringent merger control laws, none of these attributes cause states to discriminate against cross‐border mergers. Countries with high per capita incomes, large markets and strict merger control laws, do use those regulations to discourage foreign acquirers. A second set of tests, based on observations of individual deals, rather than national aggregates, reveal that governments are particularly averse to foreigners acquiring firms that are bankrupt or in the defence sector. Overall, governments do treat cross‐border mergers and acquisitions differently, and use their merger control laws to discriminate against foreign investors, particularly with respect to certain types of transactions.

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  • John Conybeare & Dong‐Hun Kim, 2010. "Barbarians at the Gates: State Control of Global Mergers and Acquisitions," The World Economy, Wiley Blackwell, vol. 33(9), pages 1175-1199, September.
    • Handle: RePEc:bla:worlde:v:33:y:2010:i:9:p:1175-1199
    DOI: 10.1111/j.1467-9701.2010.01271.x
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    2. Joseph A. Clougherty & Nan Zhang, 2021. "Foreign investor reactions to risk and uncertainty in antitrust: U.S. merger policy investigations and the deterrence of foreign acquirer presence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(3), pages 454-478, April.
    3. Fabienne Boudier & Julie Lochard, 2013. "How do Cross-Border Mergers and Acquisitions Answer to Deregulation in Services?," The World Economy, Wiley Blackwell, vol. 36(11), pages 1424-1441, November.
    4. Myznikava, Katsiaryna (Katherine) & Farinha, Jorge, 2023. "The impact of political freedoms on cross-border M&A abandonment likelihood," The Quarterly Review of Economics and Finance, Elsevier, vol. 91(C), pages 112-138.
    5. Mariotti, Sergio & Marzano, Riccardo, 2021. "The effects of competition policy, regulatory quality and trust on inward FDI in host countries," International Business Review, Elsevier, vol. 30(6).
    6. Joseph A. Clougherty & Nan Zhang, 0. "Foreign investor reactions to risk and uncertainty in antitrust: U.S. merger policy investigations and the deterrence of foreign acquirer presence," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-25.
    7. Budzinski, Oliver, 2012. "Würde eine unabhängige europäische Wettbewerbsbehörde eine bessere Wettbewerbspolitik machen?," Ilmenau Economics Discussion Papers 78, Ilmenau University of Technology, Institute of Economics.
    8. Sergio Mariotti, 2023. "Competition policy in the new wave of global protectionism. Prospects for preserving a fdi-friendly institutional environment," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(2), pages 227-241, June.
    9. Clougherty, Joseph A. & Zhang, Nan, 2023. "Antitrust policy and inward FDI: The impact of policy risk and uncertainty on U.S. inward-FDI flows," International Business Review, Elsevier, vol. 32(4).
    10. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    11. Jing Yan, 2018. "Do Merger Laws Deter Cross‐Border Mergers and Acquisitions?," Australian Economic Papers, Wiley Blackwell, vol. 57(3), pages 376-393, September.

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