Determinants of Cross Border M&As: The Experience of Korea and the Role of Trade Cost
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This paper explores the relationship between trade cost and cross border mergers in Korea during the post-crisis period of 2000~2010. In particular, attempt was made to verify if there is differential impact of trade cost depending on the type of cross border mergers and to test for the comparative advantage theory of cross border mergers. Findings show that trade cost is negatively correlated with cross border mergers in general, but positively correlated for horizontal mergers. At the same time, comparative advantage of source countries as measured by the Balassa Index, was shown to be positively correlated only in the case of horizontal M&As. This result reflects the fact that most cross border mergers undertaken in Korea are non-horizontal in nature. The implication is that the negative correlation between trade cost and cross border mergers comes from the non-horizontal nature of most of the CBMAs in Korea rather than due to cross border mergers being used as instruments of comparative advantage by acquiring firms.
Abstract
This paper explores the relationship between trade cost and cross border mergers in Korea during the post-crisis period of 2000~2010. In particular, attempt was made to verify if there is differential impact of trade cost depending on the type of cross border mergers and to test for the comparative advantage theory of cross border mergers. Findings show that trade cost is negatively correlated with cross border mergers in general, but positively correlated for horizontal mergers. At the same time, comparative advantage of source countries as measured by the Balassa Index, was shown to be positively correlated only in the case of horizontal M&As. This result reflects the fact that most cross border mergers undertaken in Korea are non-horizontal in nature. The implication is that the negative correlation between trade cost and cross border mergers comes from the non-horizontal nature of most of the CBMAs in Korea rather than due to cross border mergers being used as instruments of comparative advantage by acquiring firms.
참고문헌 (14)
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