For Fair Competition Or Protectionism? Cross-border M&As and Competition Laws

• In Event: The Political Economy of the Global Financial System

Abstract

Do host governments favor domestic mergers and acquisitions (M&As) over cross-border M&As? This paper explores a part in the international political economy literature that has been relatively understudied, which is the politics of M&As. I focus on competition laws (or antitrust/anti-monopoly law), which governs all M&A activities to assess the level of restrictiveness on foreign firms' domestic market operation. Based on the assessment of the competition laws applied to both domestic and cross-border M&As, I argue that host governments are more likely to advocate for domestic firms' interests, and thus protect the industry against cross-border M&As. By examining 36 member states of the Organization for Economic Cooperation and Development at industry-level I find that national competition laws discourage M&As that involve foreign global parents more substantially than M&As with domestic global parent. Thus, I conclude that governments of developed countries use competition and national security regulations as ways to protect domestic firms.

Author

• Hyeon-Young Ro, Princeton University