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Over the past two decades, cross-border M&As have totaled over eight trillion dollars and have fluctuated widely from year to year. In this paper, I establish four key facts about the dynamic patterns of cross-border mergers and the factors that drive them: (1) Cross-border mergers come in waves that are highly correlated with business cycles. (2) Most mergers occur when both the acquirer and the target economies are booming. (3) Merger booms have an industrylevel component (productivity shocks), a country-level component, and a worldwide component (financial shocks). (4) Across one million observations of listed firms, acquirers tend to be more productive and targets tend to be less productive, compared to their industry peers. These facts are consistent with the neoclassical theories of mergers where productive firms expand overseas to seize new investment opportunities, but not with the widely held views that most cross-border mergers occur when the target economies are in a recession or face a financial crisis. I also find that cross-border M&As, both during booms and busts, do not worsen operating performance of the participating firms.

JEL Classifications: F23, F44, G15, G34
Keywords: Cross-border Mergers, Merger Waves, Capital Flows



In the past two decades, 26% of worldwide M&A activities involve acquirers and targets from different countries. The aggregate volume of cross-border mergers from 1989 to 2008 totals more than 8 trillion dollars. In spite of such a large volume, most of the M&A literature focuses on domestic mergers. Moreover, the amount of cross-border mergers varies greatly from year to year. For example, the volume of worldwide M&A deals dropped by 62% from 2000 to 2003 but bounced back by 158% in 2006.1 Despite such a large year-to-year fluctuation, most papers on cross-border M&As study the effects of long-run determinants like corporate governance and capital...
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