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The Determinants of Cross‐border M&As: The Role of Institutions and Financial Development in the Gravity Model
Author(s) -
Hyun HeaJung,
Kim Hyuk Hwang
Publication year - 2010
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2009.01224.x
Subject(s) - economics , quality (philosophy) , gravity model of trade , panel data , financial market , mergers and acquisitions , international economics , monetary economics , finance , econometrics , philosophy , epistemology
This paper examines the macroeconomic determinants of cross‐border mergers and acquisitions (M&As). Using a panel dataset of bilateral M&A deal values for 101 countries for 17 years ranging from 1989 to 2005, we investigate both home and host‐country factors that may play an important role in determining the size and direction of M&A flows. Overall, the empirical results suggest that legal and institutional quality and financial market development increase M&A volume across borders. The significant effect of institutions, however, may disappear for transactions between countries in similar stages of the development.