Extending Industry Specialization through Cross-Border Acquisitions
We investigate the role of industry specialization in horizontal cross-border mergers and acquisitions. We find that acquirers from more specialized industries in a country are more likely to buy foreign targets in countries that are less specialized in these same industries. The role of industry specialization in foreign acquisitions is more prevalent when contracting inefficiencies and exporting costs limit arms' length relationships. The economic gains in cross-border deals are larger when specialized acquirers purchase assets in less specialized industries. These results are consistent with an internalization motive for foreign acquisitions, through which acquirers can apply localized intangibles on foreign assets.
We thank David Denis (the editor), two anonymous referees, Kenneth Ahern, Miguel Ferreira, Cesare Fracassi, Murray Frank, Rose Liao, Pedro Matos, Tomasz Michalski, Holger Mueller, and seminar participants at MIT, Monash University, the University of Toronto, the University of Maryland, the University of Pittsburgh, the University of Warwick, the 2016 American Finance Association Meetings, the 2015 FIRS conference, the 2015 LBS Corporate Finance Symposium, the 2015 Ohio State Corporate Finance Conference, the 2014 Washington University Conference on Corporate Finance, and the HEC Paris-Princeton Finance Workshop for helpful comments. A previous version of the paper has circulated under the title "Extending Comparative Advantage through Cross-Border Acquisitions". The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Laurent Frésard & Ulrich Hege & Gordon Phillips, 2017. "Extending Industry Specialization through Cross-Border Acquisitions," Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1539-1582. citation courtesy of