Partial ownership and cross-border mergers
Stähler, Frank
Cite this item:
Stähler, F. (2005). Partial ownership and cross-border mergers (Economics Discussion Papers Series No. 522). University of Otago. Retrieved from http://hdl.handle.net/10523/992
Permanent link to OUR Archive version:
http://hdl.handle.net/10523/992
Abstract:
Partial ownership can be used as a screening device by a foreign firm which wants to merge with a local firm whose productivity is private information. As partial ownership is confined to sharing future merger profits, it cannot achieve true revelation in all cases but improves expected merger gains also in an equilibrium which is not fully separating. The example of a Cournot target market in which a horizontal merger reduces marginal cost demonstrates the general results. If cost reduction is exogenous, a separating equilibrium exists. If cost reduction is endogenously determined by investment of the merged firm, equilibria exist which do not fully separate but imply partial ownership.
Date:
2005-12
Publisher:
University of Otago
Pages:
29
Series number:
522
Keywords:
merger; multinational firms; asymmetric information; Partial ownership; Foreign direct investment
Research Type:
Discussion Paper
Collections
- Economics [318]
- Discussion Paper [441]