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Review of Financial Studies Vol. 34 No. 10 2021

International Trade and the Propagation of Merger Waves

Muhammad Farooq Ahmad1; Eric de Bodt2; Jarrad Harford3

1 SKEMA Business School - Université Côte d’Azur · 2 NHH (Norwegian School of Economics) and Caltech · 3 Foster School of Business at the University of Washington China Institute of Economics and Finance, Fudan University, and ECGI

Abstract

Cross-border merger activity is growing in importance. We map the global trade network each year from 1989 to 2016 and compare it to cross-border and domestic merger activity. Trade-weighted merger activity in trading partner countries has statistically and economically significant explanatory power for the likelihood that a given country will be in a merger wave state, at both the cross-border and domestic levels, even controlling for its own lagged merger activity. The role of trade as a channel for transmitting merger waves is confirmed using import tariff cuts and trade sanctions as instruments to mitigate endogeneity. Overall, the full trade network helps our understanding of merger waves and how merger activity propagate across borders.

DOI
10.1093/rfs/hhaa104
Volume
34
Issue
10
Pages
4876-4925
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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