Characteristics, Determinants and Impacts of Cross Border Mergers in the APEC Region

This study attempted to map out the patterns of cross border M&As (CBMAs) in the APEC region, and empirically verify the determinants of CBMAs, focusing on the role of trade cost. Despite the increasing levels of CBMAs in the APEC region, its determinants and impacts in the region, especially in the less developed economies of the region, remain under-researched. This study hopes to contribute to filling this gap in the literature. The empirical analysis shows that cross border mergers increased with the size of the two countries involved, as expected. While multilateral trade cost in general had a positive effect on bilateral CBMA, indicating reduction of overall non-horizontal biddings from competing countries, the effect becomes negative as proportion of horizontal mergers increases. This implies that high trade cost encourages tariff-jumping, horizontal CBMA from other competing countries. In the case of bilateral trade cost, number of CBMA decreases as trade cost increases in general, reflecting the high degree of non-horizontal CBMA in the APEC region. However, this became positive, as proportion of horizontal CBMA increased. This implies that for horizontal mergers, again, tariff jumping rather than comparative advantage was the more important motivation. Contrary to expectations, trade liberalization and market integration in the APEC region is shown to have a negative effect on CBMA from non-APEC member countries. APEC economies are heavily dependent on each other as a source of foreign investment and that cross border M&As are largely a regional affair. This suggests that CBMA in the APEC region is closely related to the regional vertical division of labor, and that, firms in the region are using CBMA as an instrument for restructuring and reorganizing across the region as trade liberalization and market integration have progressed in the APEC. It would be therefore important to explore the role of CBMAs in this restructuring process at a more micro level, such as at the level of production networks, and making comparisons across different industries